Blue-chip final-salary pensions fade

BLUE-CHIP companies offering inferior 'money purchase' pensions to their new recruits now outnumber those offering traditional 'final-salary' schemes.

The proportion of the biggest 350 listed companies offering guaranteed 'final-salary' pensions has dropped from 65% to 40% in a year, according to a survey from pension experts Mercers.

Only four in 10 employers still offer new employees final-salary pensions, which guarantee a level of retirement income regardless of stock market performance.

'Undeniably there has been a huge shift in the nature of pension provision in recent years,' said Mercers partner Tim Keogh. 'But it would be an oversimplification to say that final-salary schemes are dying out.'

Instead, some employers were upping employee contributions or reducing the rate at which retirement benefits accrue. The FTSE 350 companies together face a £90bn deficit on their pension funds, according to the snapshot FRS17 measure.

UK pension funds have enjoyed their best quarter for three years as the Iraq war ended. Balanced funds rose in value by 11.2% in the three months to June, said the latest Russell/Mellon CAPS figures.