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Employers &#39are the real threat&#39 to falling provision

The Government has denied that pension provision in the UK is in crisis but says falling contributions from employers are the real threat to savings.

Speaking at the Financial Services Forum about fears of a pension abyss as a raft of companies shut their final-salary schemes, Treasury economic secretary Ruth Kelly claimed many people are better off in defined-contribution schemes.

She said final-salary schemes are really only beneficial to people staying with the same employer throughout their working life and more flexible workers are better suited to defined-contribution schemes.

Kelly says the biggest problem is not that employers are switching to defined-contribution schemes but that they are also reducing contribution levels.

She said recent moves by high-profile household names to close their final-salary schemes and the introduction of accounting standard FRS17 is bringing in to sharp focus forces that were already at work.

Kelly said: “This is not a new phenomenon but it is now coming in to sharp focus. The real issue for employees is if the underlying level of contributions is being lowered at the same time.

“If that is being done without people being made aware of what is going on, it is a real issue. The problem is far more to do with the level of contributions.”

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