A new report released by the CBI (Confederation of British Industry) warns that thousands of employees in the private sector that have been contributing to the final salary pension schemes may soon be forced to change their pensions into defined contribution plans.
As increasing deficits are hindering competitiveness, directors of eight out of ten companies told the CBI that their final salary schemes are going to come to an end.
The official report from the CBI said that as firms are starting to restructure to get ready for recovery from the poor economy the attention is turning to widening pension deficits since they are impairing recovery efforts.
Most of the final salary pension schemes do not accept new members with membership closed earlier in the decade, but now even those who are already existing members may see a change in their terms.
The CBI reports that 73% of businesses in the UK are fearful that they will need to increase payments in order to continue funding the schemes already in place.
Deputy General of the CBI, John Cridland, stated that firms are not ignoring their obligations to those who are enrolled in pension schemes, but that the firms need to get themselves back into a fit shape in order to take an active role in the economic recovery.
Cridland added that the cost of running such pensions is damaging the UK business’s ability to compete in the market and that the cost of continuing to run final salary pensions is unpredictable and high.