Money-purchase move reflects modern careers

first_imgMoney-purchase move reflects modern careersOn 24 Apr 2001 in Personnel Today Related posts:No related photos. Comments are closed. Previous Article Next Article BT has closed its final-salarypension scheme, but it has denied that the move is a bid to cut costs.The firm’s £25bnscheme is thought to be one of the biggest in the country, but from this monthall new employees will only be able to join BT’s money-purchase pension scheme.Under final-salarypension schemes, the pension an individual receives is based on their salary ator near retirement, whereas with money-purchase schemes the value is determinedby how much is put in and the performance of the stockmarket.A spokesman for BT,which is trying to reduce its £30bn debt, said the company had made the changebecause money purchase pension schemes were better suited to today’sfast-moving labour market.She said,”Working patterns are changing. Now people expect to have several differentjobs during their lifetime and they are looking for a pension that reflectsthat. The defined contribution approach was more appropriate for them.”The spokesman said thechanges had been made in consultation with unions and claimed the money purchasescheme would cost BT about the same as the final salary scheme.BT is the second majorUK employer to close its final-salary scheme to new employees following ICI,which recently adopted a similar strategy.Roger Key, a partnerat consulting actuaries Watson Wyatt, said the move to money-purchase pensionsmeant uncertainty for employees. “From a company’spoint of view, final-salary pension schemes have a volatile cost in terms ofthe contributions it has to pay,” he said.”Undermoney-purchase schemes, the investment risk is transferred to the employee. Ifthey retire at the right time they will get a good pension, if they retire atthe wrong time they won’t.”Key saidmoney-purchase schemes are better for people at the start of their careers whoare unlikely to stay in the same job. last_img

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