Final Salary Pension Schemes Still Under Pressure
While the headlines about the state of the pension industry, and company pension schemes in particular, may have calmed down, the situation is still getting worse behind the scenes. Research has shown that 8 out of 10 final salary schemes are now closed to new members, with many members being pressurised into considering a conversion to money purchase schemes.
The news seems to confirm what has been happening on the stock market, where the billion pound takeover of Alliance Boots was dogged by problems about pension funding. It was only after the party taking over the company agreed to specific funding liabilities over the coming years that the takeover was able to go through. However, there are still some concerns that the Pension Fund Trustees may well have agreed funding at a level which may see the scheme encounter difficulties in the future.
Pension funds have become a major part of many proposed stock market takeovers, with the likes of Sainsbury under threat, only for the potential predator to drop any offer due to pension scheme funding implications. Gone are the days of the 1980s when the likes of Lord Hanson were able to raid a takeover target’s pension scheme and use the surplus to fund the takeover, and expansion plans.
There are now few, if any pension funds who are now in surplus and the situation looks as though it will get worse before it gets a whole lot better.
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