| Employers have an increasingly crucial role in the future of pension reform. Some of the biggest and best employers in the UK are expected to close the final salary pension schemes they run for their staff to all investors in the next 12 months. About 70 per cent of big employers have already closed their final salary scheme to new staff, but have kept the pension funds open to further contributions from existing members.
'A lot of people in the industry are saying that the next big wave of change is going to be closure to future accruals. Everything is very different to when these schemes were set up.'
Ironically, recent government initiatives to protect and regulate final salary pension schemes have had the effect of discouraging finance directors from running them at all.
“There isn't any coherent set of incentives or a coherent regulatory framework”
Final salary schemes have traditionally been regarded as the most generous and secure form of pension scheme: the pension they pay is linked to the employee's earnings and the number of years' employment with the company.
In contrast, the benefits paid out by money purchase schemes, the alternative to final salary, depend on the size of contributions made by both employer and employee, and the performance of the investment markets.
However, many companies have huge pensions liabilities, but for some, the biggest risk facing a lot of pension schemes is not equities crashing 20 per cent, or longevity but will their company be around in five or 10 years to pay the benefits?
‘Pensions tensions’ is likely therefore to be the catalyst for a lot of changes to the ways in which companies allocate investment assets, but also, in a positive way for companies to examine how to embrace changes to their long-term relationships and compensation obligations to employees. Pensions are in a dynamic and formative stage and a new era of scheme design and alternative investments are emerging. This conference firmly addresses this issue and it has been designed to ensure a though-provoking and stimulating debate over the two day programme.
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