“The financial crisis hit many areas of the British economy but perhaps none so dramatically as the pensions industry. The impact of poor investment returns and record low interest rates has had dire consequences for UK pensions.
“Savers in DC schemes saw their pension aspirations dashed as low interest rates sent annuity prices soaring and, as a result, dreams of financial security in retirement were dealt a harsh blow as retirement incomes plummeted. For DB schemes the impact, for many, has been even more severe. The record low interest rates have meant that the typical cost to UK companies of providing DB pensions has doubled over the last 10 years – and that is before the cost of financing ever growing pension deficits caused by the turbulence in financial markets.
“Our research shows that 10 years ago, there were just 8 FTSE100 companies that recorded no DB benefit accrual to any employees. Now 31 FTSE100 companies record no DB accrual to any employees and most of the rest of the FTSE100 are in the process of closing down their DB pension schemes. Outside of the FTSE100 DB pension schemes in the private sector have closed even faster. The financial crisis has taught us many lessons and one of the hardest has been that the golden era of DB pensions has sadly come to an end. As a society we now need a major rethink about how we provide for our retirement.”
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