Companies thinking twice on pensions

THE rate at which employers are closing final-salary pension schemes has slowed, says a survey by consultants Watson Wyatt.

A study of 290 schemes found half had reviewed their pensions over the last 12 months. But fewer than one in four had closed their schemes to new members, while 55% made no big changes.

Final-salary schemes have run into deficit because of plunging stock markets and rising life expectancies. Many companies are pushing new staff into riskier stock market linked plans.

Colin Singer, a partner at Watson Wyatt, said more employers are 'looking at other ways of reducing the costs and risks'. Options include 'career average' pension schemes.

Companies including Nationwide and Safeway have introduced these plans, which are less expensive because benefits are linked to earnings throughout an employee's working life rather than their final salary when their pay usually peaks.

Other options include 'cash balance' plans, where contributions increase with age and investment returns are based on a predetermined formula.