The UK Economy Today
There are around two million people who are still paying into final salary – or defined benefit – schemes, despite wide-spread closure of these schemes to new entrants in recent years. But, while only 9pc of defined benefit schemes have so far closed to existing members, according to the research, around half expect to have closed by 2012, including blue-chip schemes which until now have mostly managed to hold out against closing to existing employees.
Most recently, Barclays said it was closing to existing members, and BA refused to rule out doing the same. Members of such schemes would be entitled to keep the benefits from what they have accrued so far in the final salary scheme, but all future contributions would go into a defined contribution scheme, where investment risk is shouldered by the members rather than the employer.
Schemes have been hard hit by stockmarket turbulence, falling interest rates and quantative easing, which has caused liabilities to balloon.
Government tinkering, such as the introduction of a tax on pension surpluses in the late 1980s by the Conservatives, helped convince employers to reduce or funding levels.
On the other hand City workers have seen their pay packets boosted by an average of six per cent, less than a year after bringing the world economy to the brink of meltdown.
As competition for ‘star performers’ pushes up salaries, a survey today revealed that financial workers and bankers were being offered around six per cent more money between June and July than in previous months.
This is despite many of the banks only being able to turn a profit because they have been bailed out with taxpayers’ money.
The City pay push also comes as a new report revealed six million Britons are now out of work and claiming benefit, many of whom are casualties of irresponsible City deals.
The actions of the financial sector are expected to cost a million Britons their jobs.
The average basic salary for banking staff and those in the financial services is now £53,223, thanks to a month-on-month rise, according to recruitment firm Morgan McKinley.
The group said pay is still one per cent lower than a year ago, but confirmed
While Bankers saw an increase in salary normal folk were seeing more bankruptcies.
The number of people declaring themselves bankrupt in the UK rose 22 per cent this quarter-year compared with the same period last year.
However, the London results were much brighter – only rising by 9 per cent since 2008, with just under 6,000 Londoners petitioning for bankruptcy.
John Bangham, a director at KPMG, said this number will continue ‘picking up steam as the myriad of consumers can no longer service their debt obligations.’
He added:’The insolvency figures will only increase.
‘Some banks are starting to offer mortgage products again.
‘[However,] securing debt on homes, either by way of refinancing or new mortgages, remains very tough for many people.’
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