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Research finds outflow from final salary is accelerating

Uncertainty surrounding the minimum funding requirement for final-salary occupational pension plans is causing an unprecedented switch from final-salary to money-purchase schemes, according to consultant Jardine Reeves Brown.

In its fourth annual survey of occupational pension compliance and standards, the employee benefits specialist found 29 per cent of the final-salary schemes surveyed had switched to money purchase.

This was a dramatic turn-round on the previous year&#39s situation, when 24 per cent of schemes were merely considering switching to money purchase.

It also found 71 per cent of schemes had considered alternative forms of pension provision during the year.

JRB surveyed 173 approved occupational pension plans with total assets of £125bn, representing 16 per cent of the total funds under management within UK occupational plans

Business development director John Broker says: “What is driving the switch from final-salary to money-purchase schemes is in part the minimum funding requirement. Changing to a money-purchase scheme reduces the risk of exposing the scheme to volatile costs at a time when the Government is still consulting on the MFR.”

The annual survey investigates the changes affecting the market and monitors how the running of plans is being affected by the requirements of the Pensions Act.

It found 95 per cent of trustees of occupational plans had reviewed the issue of socially-responsible investment and, where members have a choice of funds in which contributions are invested, 27 per cent of plans had made an ethical

fund available.

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