Final salary pensions die out even for top executives

By Jennifer Hill

LONDON (Reuters) - Generous final salary pension schemes are a thing of the past, even for top executives, according to a report.

Some 70 percent of new senior employees at large British companies are now offered a defined contribution (DC) pension, research by global consultancy Watson Wyatt found.

Benefits from DC plans, also known as money purchase pensions, are based on contributions and investment returns, whereas defined benefit schemes -- which were once the norm for all employers -- are based on final salary.

Scores of businesses were forced to close these schemes to new workers in the wake of the 2000-3 bear market and increasing longevity, which made them hugely expensive to run and saw schemes rake up million pound deficits.

However, many firms left them open to new senior executives, creating a two-tier corporate pension environment.

But John Ball, a senior consultant at Watson Wyatt, said: "Due in part to pressure from groups as diverse as the Association of British Insurers and the trades unions, in most cases this is no longer considered acceptable practice."

The research found that the percentage of companies offering only DC plans to new senior employers was similar when looking at the Britain's 100 largest listed companies or across all firms in the FTSE 350.

However, typical contribution rates vary by size of company. The median DC contribution rate for chief executives in the FTSE 100 is 22 percent, but this falls to 17 percent for bosses of FTSE 250 firms.