• Final salary schemes, which go under many guises – occupational schemes, works pensions and defined benefit schemes to name a few – are pension schemes with many benefits which workplaces set-up for employees in the past.
    From what we have seen recently, we believe final salary schemes are slowly dying out. They are proving too expensive to maintain, especially where money is tight for many companies.

Final Salary Pension Schemes

Whether you are a firm needing such a plan set-up or reviewed, or are an individual with a final salary scheme in a previous employer, you should seek professional advice from MAP on how best to deal with it.

When someone retires from a final salary scheme, the pension they get is based on a fraction of their final salary. These schemes credit employees’ pension pots with 1/60th or 1/80th of total contributions every year they work for the employer running the scheme.

If the economy is healthy, contributions are not onerous. Problems start when either stock markets fall or the company is less profitable. Contributions then cost more, and will become an ever-growing percentage of total costs.

What an employer must do is a lot of calculations to ensure there is enough money for each person retiring. Actuaries will work on every year to ensure such obligations are met. Payment into a final salary scheme is the sole responsibility of the employer. The only way a member can meaningfully affect such a scheme is whether or not they continue to work for the company.

Final salary schemes are so complex, advice can only be given by those with special FCA permissions and certification. MAP has these and our pensions specialist would be happy to advise you on any existing or old scheme.