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Actuary accuses firms of cover-up in DB &#39scandal&#39

Company finance directors are covering up the reality to shareholders and employees by claiming that shifting occupational pension schemes from defined benefit to defined contribution will save money, a leading actuary has told MPs.

Testifying before the Parliamentary Work and Pensions select committee&#39s inquiry last week, Hymans Robertson senior partner Ronald Bowie said companies closing their DB scheme to new entrants and offering a DC pension to employees is a “scandal”.

He told MPs it will not result in any savings for companies for at least 20 years and anyone who claims that the move is motivated by a desire to save money is lying.

He said the truth is that companies use the move from one scheme to another as an excuse for cutting contributions to employees&#39 pensions.

After five years, the move could result in more than half of employees being in the new scheme but there will still be “hundreds of millions of pounds” of liabilities sitting in the closed DB scheme.

The decline of final-salary schemes has been one of the most discussed symptoms of the so-called pension crisis, with many companies justifying the move by saying they need to cut costs.

Bowie said: “The fact that employers are changing from DB to DC schemes and claiming it makes any difference to their balance books for at least 20 years is a disgrace.”

Labour MP and committee member James Purnell says: “There are a lot of people who believe some companies are disingenuously using the current trend to shut down their DB schemes and move to DC schemes. Unfortunately, there is not much the Government can do about it.”

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