Death of the Rolls Royce of pension provison

The FT reports today on a survey by the Association of Consulting Actuaries. The survey tells us that almost 9 out of 10 final salary pension schemes are closed to new members and that 18% are now closed to further contributions by existing members.

What used to be the “Rolls Royce” of pension provision in the UK now appears to be on its last legs (sorry to mix my metaphors!)

It is only going to get worse.

In 2012 the Government plans to start to introduce Personal Accounts as a way of saving for retirement. Some 60% of employers intend to review their pension provision for staff ahead of the implementation of Personal Accounts.

A further 24% already intend to reduce the pension benefits that they provide and 15% intend to close down their pension schemes altogether.

Let me see if I understand what is happening here.

A system of pension provision designed to enhance saving for retirement in the UK appears to be having the opposite outcome. Sadly it demonstrates a lack of joined up thinking on the part of not just Government but politicians of all persuasions who support personal accounts.

The solution must surely have been simpler.

What we need is a radical overhaul of the State pension system with a basic State pension that ends means testing and abolition of contracting out for all types of pension schemes (occupational and personal schemes) and incentives for all to save and invest to top up their State benefits.

When you cast your vote in May perhaps ask your Parliamentary candidate if they actually understand what is going on in UK pensions.