Some of Britain’s biggest firms are closing their pension schemes as costs rise. The cost of Defined Benefit pension schemes could double in the next few years, according to a retirement consultancy company. Defined Benefit (DB) schemes give workers a guaranteed income for life once they retire.
The Telegraph reports –
“Several large firms will face a crisis point in the coming year as they go through triennial reviews of their pension obligations, which could require massive cash injections or even closing the scheme to new benefits to reflect their growing burden… Imperial Brands and National Grid are among the blue-chip firms facing costly revaluations of their schemes this year, according to JLT, while Lloyds, BT and BAE Systems will revalue next year. Not every firm will close its pension, however – United Utilities withdrew plans to shutter its scheme this year after unions protested… “It is difficult to conceive that such a prospect wouldn’t lead the schemes’ sponsors to take some kind of drastic action to mitigate those expenses, particularly as large pension deficits can have a detrimental impact on the company’s financial health and, therefore, its share price and dividend payments,” said Charles Cowling, director at JLT Employee Benefits… Many companies including Royal Mail, Marks & Spencer and Tesco have recently made moves to close their defined benefit pensions to put the brakes on their ballooning costs. Just 23 of the FTSE 100 still allow ordinary workers to accrue new benefits.”