LONDON - Pensions' appear to be the major topic in the first half of the new year with many enterprises announcing the closure of their final salary schemes for new recruits and even old employees. As UK pension schemes struggle to cope with the huge deficits, the question on the mind of an average employee is whether any long-term solution exists.
The pensions problem has been compounded by the low yields on government bonds, as there have been minimal returns on 50-year index-linked gilts. Pension schemes are also under the scanner and questions are being asked as to what extent do they depend on the returns from bonds.
Last week, a National Association of Pension Funds survey revealed that 25 percent of pension schemes in the country increased their dependence on bonds last year, while 30 percent schemes actually reduced it. The shift into the bonds market is likely to continue, the report said, since 63 percent of UK pension portfolios still invested in equities, while 29 percent were focused on bonds.
Businesses will also have to deal with the Pension Protection Fund, which will begin functioning in a few weeks' time. It is reported that the PPF will ask for £575 million from UK businesses in the first year. And David Norgrove the chief of the Pensions' Regulator admitted that it was going to be a tough job to keep up with people's expectations, "We are one of the things which have focused minds on the cost of pensions," he said.
The main difference that his office has made is that they want companies to report anything that would affect pensions, which is a good thing for many enterprises are looking to get away with pensions' problems by introducing questionable schemes.
Posted
on : Sun, 29 Jan 2006 14:05 GMT | Pensions News
By : Paula Jenkins
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