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Only a final few left in private sector DB

The decisions by Barclays and BP to scrap their final-salary pension schemes could be the beginning of the end of the top-quality schemes in the private sector.

Last week, BP said it was closing its defined-benefit scheme to new members while Bar- clays is closing to future accrual after having closed its scheme to new members more than a decade ago.

Five years ago, 40 per cent of firms still offered final-salary pensions to new employees. Pension guru Ros Altmann says there are now there are just four FTSE 100 firms that offer DB schemes – Shell, Tesco, Cadbury and Diageo.

Altmann says: “If anyone was still in doubt as to whether these schemes had a viable future, the latest announcements should have removed the uncertainty.”

Barclays closed its scheme to all 18,000 members to cut costs. From December, members will be moved to the firm’s defined- contribution scheme. Accrued benefits will be frozen.

Barclays reported a £2.2bn pension fund deficit last September.

A spokeswoman says: “Managing costs, including pension costs, is one of our top priorities. It is in the best interests of all Barclays’ employees and shareholders for us to do so.”

Punter Southall principal Simon Banks says Barclays’ move is likely to be the result of capital pressures.

He says: “Banks are generally required to carry extra capital to protect against pension risks above their contributions to the pension plan. In an environment where capital is tight, this hidden pension cost assumes greater significance. The actions taken by Barclays should reduce the amount of capital required to back future pension promises.”

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