“While it is a sad day whenever yet another final salary pension scheme bites the dust, the Tata Steel employees are fighting against an inexorable trend, as the number of private sector employees in such schemes almost halving from 3 million in 2006 to only 1.6 million in2013 - and still falling. The average final salary pension scheme costs over 20% of salary for each member, has a substantial historic deficit to fund (£2bn for Tata Steel) and this deficit could possibly get worse. This hampers any efforts for Tata to sell parts of the business.
If Tata Steel hold firm, their employees may eventually need to accept the closure and try to get the best contribution rate to their new Defined Contribution (DC) scheme. DC schemes are extremely flexible these days and can even be better than a final salary scheme, as long as the right level of contributions goes in from employers and employees, bearing in mind that the average combined rate of 9.1% is less than half of the average final salary scheme level.”
|
