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Small firms shut DB schemes

Small businesses are following the pension lead set by bigger companies with a quarter of those with a final-salary scheme intending to close or wind up their plans in the next year, according to research from consulting actuary Hazell Carr.

The firm is concerned that only 31 per cent of firms have had professional advice about its options and fears companies may take the wrong action.

Many do not understand the difference between winding up a scheme, which means all liabilities are paid out immediately, and closing it, where no new entrants are accepted but the liabilities are paid out over time.

The actuary surveyed 100 firms in April, with two-thirds having less than 1,000 staff.

Director David Carr says: “Given that these schemes have been in existence for decades, this is an almost unbelievable proportion of employers intending to close or to wind up their schemes in a year.”

“Simply closing a scheme rarely solves the problems that led to the decision to move out of final-salary provision in the first place. Merely closing a scheme can often increase problems, often for decades after the scheme has closed.”

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