NI increase will produce more DB closures
UK- Pensions professionals have warned ministers that more companies are likely to close defined benefit pension schemes in an attempt to offset some of the annual £4bn cost of the 1% increase in national insurance announced by Gordon Brown in last week’s budget.
According to the Financial Times, Peter Thompson, chairman of the National Association of Pension Funds, told work and pensions secretary Alistair Darling that he knew of companies looking to cut payroll costs and that pensions were the obvious target.
“The budget addressed part of the problem of increasing life expectancy in terms of increased spending for the National Health Service, but it failed to address the other part of the problem, which is pensions,” he said.
Gordon Brown’s budget received a lukewarm reception from the pensions community, many of whom felt it did little or nothing to alleviate the increasing pensions crisis.
Numerous companies, including ICI, Sainsbury’s, BT and Marks & Spencer, have closed final salary schemes blaming the new accounting standard FRS 17 which forces schemes to report the market value of assets and liabilities on the balance sheet.
Thompson was meeting Darling, as well as director of the Association of British Insurers Mary Francis, to discuss the upcoming report by Alan Pickering on pension regulation. Pickering, former chairman of the NAPF, is due to report in June.