Pensions threat 'is deepening'

THE closure of traditional company pension schemes is accelerating, threatening poverty for millions of retired workers. Half the companies offering pensions linked to final-salary are either not allowing new staff to join the schemes or are winding them down, according to the Association of Consulting Actuaries. Almost as many are thinking about dropping them.

Companies claim they cannot afford to meet future pension bills as a slump in world stock markets over the past two years has wiped tens of billions of pounds off the value of their pension fund investments.

The City gloom lifted slightly on Monday when the FTSE index of Britain's 100 leading shares rose 126 points. However, confidence in future stock market returns is so low that many firms are taking drastic steps to reduce their future pension liabilities.

The developments threaten a national pensions crisis with the Government accused of failing to appreciate the consequences for millions of workers.

Conservative pensions spokesman David Willetts said: 'This latest evidence of the scale of the pensions crisis should take the Government out of their complacency.' He said the Government's decision to impose a £5bn a year tax on pension funds has added to the woes.

Companies are replacing final-salary schemes with inferior pension arrangements linked to the investment performance of contributions. The TUC complained that companies are using the change to contribute less to the new schemes than they do to final-salary funds. It claimed that as a result, new employees only offered entry to inferior schemes are typically suffering the equivalent of a £40 a week cut in their wages and benefits in comparison to existing workers in the final-salary scheme.