DB costs set to rise

Final salary schemes in the UK may be in jeopardy because of uncertainty about the government’s intentions for pensions, a survey by consultant Towers Perrin has found. The top 500 UK groups fear the government may have targeted investment income, capital gains, surpluses and the ability to take benefits as tax-free cash, as well as relief on pension contributions by higher-rate tax payers.
Should all these happen, it could mean that the cost of running DB schemes could rise, with £30bn (e48bn) added to employers’ liabilities, says the consultant.
Almost three quarters of participants (70%) believe the trend to DC will accelerate with the new reforms, with 57% reckoning that group personal pensions or the new stakeholder pension will be adopted by companies wanting to avoid the increasing bureaucracy – though the consultant also found confusion on employers’ part as to how to implement a DC strategy.
Bruce Moss of Towers Perrin in London says the government has caused so much uncertainty among employers that they are “voting with their feet and looking towards DC schemes”.

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