Final salary pensions predictions announced

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A piggy bank to illustrate final salary pensions predictions

Financial-planning-banner-1200x80The Pension Protection Fund has published final salary pensions predictions for 2017, revealing the Brexit vote and economic uncertainty could create challenges

A review of final salary pension schemes by The Pension Protection Fund (PPF) has published data examining the risks faced by final salary or career average pensions in 2017. The collective deficit was little changed, according to the review, which also suggested the Brexit vote and economic climate could create challenges.

“When we look back at what progress schemes have made over the last decade, it appears that many schemes are just treading water,” said Andrew McKinnon, chief financial officer for the PPF. “The average recovery plan length, at around eight years, has barely improved, which brings home the challenge we now face. The current economic backdrop, as well as scrutiny faced by the entire industry, suggests conditions will remain tough in 2017.”

According to experts, final-salary pension schemes face two major challenges: greater longevity making pensions more expensive for companies, as they have to pay pensioners for longer, along with an unpredictable economic outlook.

The PPF – the sector’s ‘lifeboat scheme’, created under the Pensions Act 2004, which pays compensation to members of defined benefit schemes when firms go bust – released figures showing that the collective deficit of 5,794 DB pension schemes was £221.7 billion at the end of March 2016, adding that this was a slight fall compared with a year earlier.

“Pension schemes used to be owners of UK companies as well as being funded by them,” added the head of retirement policy at Hargreaves Lansdown, Tom McPhail. “Pensions being used to help finance the growth in British companies is becoming a thing of the past; instead our savings are either being lent to the government or invested abroad.”

The future of such schemes has been under scrutiny in recent times thanks to the high profile cases such as the collapse of BHS and the future of steelworkers’ retirement deals.

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