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&#39FSA&#39s pay move could hit DB Confidence&#39

The FSA&#39s decision to give lower pay rises to members of its final-salary scheme could start a trend that will hit confidence in such schemes, warns Scottish Life head of pension strategy Steve Bee.

The regulator is increasing wages to members of the scheme by 4.2 per cent compared with 6.7 per cent increases for members of its money-purchase scheme.

The FSA says the move, which is believed to be the first of its kind, is designed to equalise the overall benefits given to final-salary and defined-contribution employees and reduce the deficit in its final-salary scheme which stood at £32m in March 2002.

It denies that the move is designed to encourage staff to leave the final salary scheme and says it is not setting an example for other companies to follow.

But Bee says the strategy will make final-salary scheme staff feel penalised.

FSA spokesman Robin Gordon-Walker says: “We look at pay and pension as a whole – other things being equal, the packages should be equivalent.

“People who are in the final-salary scheme have the option to transfer to the money-purchase scheme – its up to them.”

Bee says: “They are effectively paying people to leave. All the members of the FSA final-salary scheme should go and see an IFA about whether they should stay in.”

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