Bad news continues for workplace pensions

17/07/2009

Pressures on workplace pensions in the UK continue to rise, as the effects of the financial crisis continue to filter through to funds.

American Express, a credit card provider, announced yesterday that it would be suspending all of its contributions to employee pension plans for the next 18 months, as part of its £1.6 billion global downsizing programme.

Around ten per cent of the firm's worldwide workforce will also lose their jobs as part of the strategy.

The credit crunch has also put the squeeze onto pension schemes themselves - as well as companies' balance sheets.

Figures from the Pension Protection Fund also showed this week that final salary pension schemes - a kind of workplace pension which offers set guarantees of retirement income for members - held collective deficits of £200 billion.

The financial position of these schemes has drastically worsened over the past year due to falling stock markets caused by the credit crisis.

This has had a direct effect on the way pensions are structured - with workers at Barclays reportedly now primed for strike action over the closure of the firm's final salary scheme to new members.

Dr Ros Altmann, a former government pensions adviser turned independent expert, has expressed concern about the state of the workplace pension sector in the UK - which could see more and more people relying on the state pension alone in future.

"We have just about the lowest state pension of any developed country and governments over the years have relied on good private pensions to supplement the low national insurance payments," she commented.

"In fact, the state pension has been cut continuously over the years on the assumption that employer pensions or private personal pensions would invest in the stock market and deliver sufficient extra income in retirement. This hasn't worked!"

Tags; Debt Management and Banking, Retirement Money Problems,

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