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&#39Savings gap will rise by £5bn as firms turn to DC&#39

The current £27bn UK savings gap will jump by £5bn a year as more employers shift from defined-benefit to defined-contribution pension schemes, claims the ABI.

Speaking at last week&#39s Sofa conference, ABI head of pensions Joanne Segers warned that based on data from the NAPF&#39s latest annual survey, 13 companies switched from final-salary/DB schemes to money-purchase/DC schemes over the past year compared with only six switching in 2000.

Forty-six companies had closed their final-salary sch-emes to new members in 2001 compared with 18 in the previous year, which will also exacerbate the savings gap. Segers expects this trend to continue.

Lower employer contributions that come with DC sch-emes and the absence of a guaranteed level of pension at the end will see the gap widen by £5bn a year.

Segers says as employers keep existing employees in DB schemes and put new joiners into DC schemes, the balance is continually shifting and the gap will steadily increase.

To tackle this trend, she emphasises the need for advice, calls for an examination of how employers contribute to sch-emes and encourages the ind-ustry and the Government to work together to narrow the gap.

Segers said: “We have looked at the NAPF survey and our estimate is that the shift from DB to DC will add £5bn to the savings gap. I suspect a further move from DB as the pressures on employers show no sign of changing.”


SEI rethinks Dublin arm as bond is put on hold

Scottish Equitable Intern-ational is considering its options for its Dublin-based offshoot after having to put its with-profits bond on ice. SEI opened offices in Dub-lin with the intention of offering the with-profits bond. But following the events of September 11, the launch was delayed, with the company claiming that the climate was now too unfavourable, […]

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Credit Agricole Asset Management sees Eastern promise

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HSBC anger at watchdog ruling over rates switch

HSBC Bank is accusing the Financial Ombudsman Service of overlooking fairness and consumer interest after it lost a ruling about its two-tier mortgage rate strategy offering lower rates to new borrowers. The ombudsman found one of the bank&#39s existing discountrate clients had been discriminated against as they were prevented from switching to a new lower […]


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