Traditional final salary or defined benefit pensions are "near extinction" in the private sector, according to a report just published by Aon. While such risk-free retirement funds remain the norm in the public sector, Aon calculates that 83pc of those in the private sector have closed to new members in recent years. A combination of factors has created tough conditions for companies to continue with defined benefit pension schemes. These include tighter regulation, volatile stock market conditions, strengthening of longevity assumptions and fears over future developments in accounting for pensions. In our survey last year, about a quarter - or 28pc - were still open to new members, down from half in 2003. The findings will fuel calls for a level playing field as public sector workers' generous final salary pensions are protected by future tax income. Gordon Brown has been accused of destroying private sector retirement schemes by axing the dividend tax credit in his first Budget as Chancellor in 1997. Actuaries claim the move cost £5bn a year and plunged the system into crisis, leaving companies with little option but to close the schemes to new members.
The Telegraph