UK - The UK's Trades Union Congress (TUC) has warned against recent trends to "junk" final salary schemes.
The TUC claims that the move can have an adverse affect on staff morale.
TUC senior policy officer Tom Powdrill said: Many companies are taking a short-term approach to pension provision - junking final salary schemes because at present they carry a significant cost. This risks damaging staff motivation and employees’ loyalty to these companies.”
Powdrill argued that it is “misleading” to say that final salary schemes are too expensive: “For many employers, surging share prices in the 1990s meant they were able to reduce, or even stop altogether, the contributions they paid into such schemes. Now, when markets have performed less well, they are required to contribute again.
Many employers are now switching to money purchase schemes. A high quality money purchase scheme can provide a good pension but it must be remembered that they are also a gamble. If the stockmarket does badly the pension of the individual shrinks.”
By Madhu Kalia
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