Pension fear 'for a whole generation'

MORE than 6,700 company pension schemes have been scrapped in the last year, latest figures show. The news adds to fears that an entire generation is facing a cash-strapped retirement.

Some 6% of company schemes - one in 16 - were wound up, according to the watchdog body, the Occupational Pensions Regulatory Authority.

Many companies closed schemes because they hit financial trouble and some actually went bust. But a large number simply could no longer afford the costs of running a scheme, especially now that people are retiring earlier and living longer.

The fall in numbers, following the loss of 9,000 schemes the previous year, will add to pressure on the Government to solve the pension crisis. The news came just a day after it was revealed that MPs have voted themselves a 25% pension rise, partly-funded by the taxpayer.

Ministers have promised a consultation paper on pensions in the autumn, following two reports by Government advisers. But many believe this will be too little, too late.

Liberal Democrat pensions spokesman Steve Webb said: 'Figures like these confirm that the decline in good quality occupational pension schemes has accelerated rapidly. It highlights the need for urgent action - not just another consultation.'

Radical moves will be needed to close Britain's £27bn savings gap. Official figures show that half the 30m Britons of working age do not have any pension other than the State one.

David Astley, of the National Association of Pension Funds, said: 'Though the majority of schemes closing are likely to be small, this is still a large and worrying number. It will add to the growing problem facing retirement planning which needs to be addressed.'

Roger Lyons, general secretary of the Amicus union, said: 'This shows the depth of the crisis and the need for urgent action to protect the pensions of millions of workers from the ravages of fat cats.'

The figures cover private companies running both traditional final salary schemes and the new stock market-based ones, called money purchase or defined contribution pensions.

A firm winding up its pension scheme makes no more payments into it. The company then has three options. It can freeze the scheme and pay out pensions as expected or let another scheme take it over. These options typically happen when there is plenty of money in the fund.

But a third solution is becoming increasingly common, under which an insurance company effectively takes over the fund and administers the payments. Most people will then receive a considerably smaller pension - cuts of 40% can occur.