Labour Government Kills off Final Salary Pensions
With the tax on pensions introduced early on by the government pension funds were struggling. There always have been tensions between final salary pension schemes and defined contribution schemes. Industry and Commerce find it difficult to cope with the uncertainty of the defined contribution schemes. When inflation was higher it was easy for them to cope as the effect of inflation whittled away the benefits (and costs) of the pension schemes.
Then Labour introduce a new levy on final salary schemes. It seems a clever wheeze at the time to underwrite some final salary schemes through other ones. The end result, however, is to put more pressure on companies to close them down.
It is a bit like Labour's tax on fuel. Inevitably this has some effect in putting up costs of fuel. Gordon Brown's removal of ACT at the time seemed to have no immediate effect. The effects was entirely down the line.
The story is in the press today that soon in the private sector the number of people with defined contribution schemes will exceed those of defined benefits.