In the ongoing debate over pension provision a new report by PricewaterhouseCoopers seems to indicate that the final salary pension may be at the end of its road. According to the report, 96% of the 157 respondents suggest that the final salary pension scheme is unsustainable with as few as one in twenty employers expecting it to be open to new members in five years. In addition, there is a trend towards ending the final salary pension provision for existing employees. 16% of respondents have already frozen the future benefits accrual for current members of the scheme, while only 26% of companies suggested they would maintain their current provision.

The main reasons cited for the revision of the pension scheme were the need to reduce costs and risk to the employer. However, interestingly 77% of the respondents also said that the recent pension tax proposals made by the Chancellor will further de-motivate companies from investing in either the defined benefits or defined contributions pension scheme.

In the latest budget, Darling announced that high rate tax payers will not only lose their 40% tax relief on their own pension contributions, but will also have to pay tax on their companies contributions.  This is likely to be a costly sum for those on a final salary pension as every time you get a pay rise, so will your companies pension contribution increase, leaving you with a higher tax bill. 

On the other hand, 88% of companies surveyed felt that the public sector has an advantage in its ability to offer the defined benefits schemes.