Cost pressures from the credit crunch are putting retirement savings scheme providers in a very difficult position, according to Standard Life.
A major insurer has called for a radical shake-up of retirement savings schemes.
Standard Life published a report today, looking into how workplace plans have been affected by the credit crunch. It suggested that financial pressures from the crisis faced by business and the ageing population would result in less generous pensions being available to many over the long term.
Workplace pension schemes work by an employee saving a certain amount of their salary each month, to which is then added an additional contribution from the employer. Standard Life pointed out that final-salary schemes, a type of pension which imposes stricter financial guarantees on the company and generally results in a better pension income from the worker, are being forced to close to new members due to the pressures of the credit crunch.
Many of these plans have been plunged into the red by the crisis. Recent figures from the Pension Protection Fund suggest that the collective deficit of the 7,800 final-salary schemes in the UK is now at around £200 billion.
The report also stated that the value of defined-contribution schemes, a different type of workplace pension that is more exposed to fluctuating markets, has dropped by as much as 40 percent around the world due to falling stock markets in the financial crisis.
Andrew Dickson, senior business development manager at Standard Life, commented: "Employers are having to navigate their way through the 'perfect storm'. They face challenges around budgets, with benefit spend being squeezed while trying to retain talent through these difficult times."
He added: "UK pension provision in the future will be one where flexibility at both the saving and retirement stages are fully supported by employers."
