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Pensions boosted as firms raise payments

Over half of firms with final-salary pension schemes have increased their contribution rates, according to research from the National Association of Pension Funds.

The NAPF annual survey shows that one in four final-salary pension schemes have been closed to new entrants this year compared with 19 per cent last year.

About three-quarters of companies say the move away from final-salary pension schemes was to contain costs.

However, for every scheme which has shut, two have increased their contribution rates to retain a final-salary scheme for staff, with 53 per cent of employers raising contribution levels compared with only 7 per cent in 2002.

The survey showed that 91 per cent of final-salary scheme members and money-purchase scheme members who are entered automatically chose to stay in a scheme.

Average defined-contribution rates continue to be much lower than rates for defined-benefit schemes. The NAPF says that this raises the prospect of a decline in savings through workplace pensions.

NAPF chief executive Christine Farnish says: “This survey highlights the significant growth in cost to firms continuing to provide decent occupational pension schemes. What is perhaps surprising and welcome is that so many employers remain committed to pensions. However, further impositions on companies through the Pensions Bill expected in the Queen&#39s Speech could be the straw that breaks the camel&#39s back.

“The move to replace finalsalary schemes with moneypurchase continues apace. The most worrying feature of this shift is the significantly lower amounts of money going into DC schemes. This is storing up big problems for the future.”

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