LONDON, Oct 4 (Reuters) Generous final salary pension schemes are a thing of the past, even for top executives, according to a report.
Some 70 percent of new senior employees at large British companies are now offered a defined contribution (DC) pension, research by global consultancy Watson Wyatt found.
Benefits from DC plans, also known as money purchase pensions, are based on contributions and investment returns, whereas defined benefit schemes -- which were once the norm for all employers -- are based on final salary.
Scores of businesses were forced to close these schemes to new workers in the wake of the 2000-3 bear market and increasing longevity, which made them hugely expensive to run and saw schemes rake up million pound deficits.
However, many firms left them open to new senior executives, creating a two-tier corporate pension environment.
But John Ball, a senior consultant at Watson Wyatt, said: ''Due in part to pressure from groups as diverse as the Association of British Insurers and the trades unions, in most cases this is no longer considered acceptable practice.'' The research found that the percentage of companies offering only DC plans to new senior employers was similar when looking at the Britain's 100 largest listed companies or across all firms in the FTSE 350.
However, typical contribution rates vary by size of company. The median DC contribution rate for chief executives in the FTSE 100 is 22 per cent, but this falls to 17 per cent for bosses of FTSE 250 firms.
These headline rates also hide a lot of variation. For chief executives of FTST 100 firms, the lower quartile rate is 10 per cent and upper is 30 per cent.
Irrespective of the discrepancies, Ball said the majority of new hires at executive level would wind up with far lower pensions than under old-style final salary plans -- as much as less than half.
Lower investment returns, growing life expectancy, less generous company schemes and declining state pension provision have put increased pressure on individuals to fund their own retirement.
But consumers, having raked up more than 1 trillion pounds in personal debts, are failing to save enough.
The government plans to introduce a National Pensions Saving Scheme (NPSS), also known as ''personal accounts'', in 2012 to try to plug a 57 billion pound savings gap.
The scheme, into which workers will be automatically enrolled, aims to encourage around 10 million Britons without a workplace pension to save.
But there are fears that a cap on contributions could cause employers to ''level down'' contributions to existing occupational schemes or close them altogether.
A report released on Wednesday found that 84 per cent of consumers thing the NPSS is a good idea, but only 9 per cent of independent financial advisers (IFAs) agree.
The poll of 1,000 consumers and 250 IFAs by TaxBriefs found that 42 percent of advisers believed the scheme would not impact their business and 56 percent said they would not be comfortable advising clients of its merits.
REUTERS JK PM1620