Experts say yes, and I am inclined to believe them.
Barclays announced plans yesterday to close its final salary scheme to future accruals for all 18,000 existing members in a bid to cut costs. The bank closed to new members more than a decade ago.
From December, members will be moved to the firm’s defined contribution scheme, previously reserved for new staff. Their accrued benefits will be frozen.
Barclays reported a £2.2bn pension fund deficit last September, although this is likely to have increased due to continuing stockmarket turmoil.
A spokesperson says: “Given the current economic situation, 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.”
Barclays’ move follows BP’s decision to close its defined benefit scheme to new members earlier in the week. It also comes after Fujitsu International UK and WH Smith announced plans to close to future accruals.
Five years ago, 40 per cent of companies still offered final salary pensions to new employees, according to pensions guru Ros Altmann. Now there are just four FTSE 100 firms that do – Shell, Tesco, Cadbury and Diageo.
Altmann says: “As their competitors pull out of open-ended pension commitments, the business case for retaining final salary arrangements becomes increasingly untenable.
“If anyone was previously still in doubt as to whether these schemes had a viable future, the latest announcements should have removed the uncertainty.”
Punter Southall suggests Barclays’ decision was prompted by the punitive capital requirements put on banks and building societies to cover pension risk.
Principal Simon Banks says: “Banks are generally required to carry extra capital to protect against pension risks, over and 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.
“I would not be surprised if other banks and building societies took similar action in the coming months.”
But what about public sector employees? They are clinging on to their gold-plated pension pots while the private sector seems to be hurtling towards the indisputably less adequate personal accounts scheme. That is if it survives the general election.
Altmann says: “When it comes to pensions, those making policy are totally divorced from the reality facing the rest of the country. Policymakers are cocooned in their own pensions world, seemingly oblivious of what is happening in the private sector. The increasing divide between private and public sector schemes cannot continue indefinitely.”
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