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Age Concern closes final-salary scheme

Age Concern has become the latest employer to close its finalsalary scheme and slash its contribution levels for new members in favour of a moneypurchase scheme.

The charity estimates it is having to earmark around 21 per cent of the salary budget to maintain the final-salary sch-eme, with an employer contribution of 16.5 per cent and employee contribution of 5 per cent. It says this is not a justifiable use of its campaigning and fund-raising resources.

Age Concern&#39s contributions to the money-purchase scheme will be cut to 8.6 per cent.

The charity has campaigned for bolstering pension provision, believing the basic state pension is key to provision and that employers should be encouraged to make contributions.

Pension experts are warning firms to consider all their options before shutting final-salary schemes, saying there are ways of cutting back on contributions within a defined-benefit framework. They believe employers could consider switching accrual rates from 60ths to 80ths to cut costs.

Scottish Equitable pensions development manager Margaret Craig says: “There are employers struggling with the costs of defined benefits but they do not always want to move away from the whole concept. Switching accrual rates is being considered as a way of reducing costs. Employers should not think there is only one option.”

Age Concern communications director Neil Churchill says: “The cost projections for the final-salary scheme were going to escalate rapidly to a level we could not afford. The new scheme has a good contribution level and will be more suitable for our staff. Our experience reinforces our point that something needs to be done on pension policy.”

•Pensioner poverty, p10


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