Wednesday, December 21, 2005
Pensions Rat Trap
Much understandable handwringing this morning about Rentokil's decision to close its final salary pension scheme to existing members.
We've blogged about the pensions fiasco before, and how the government's attempt to de-risk employees' entitlements via a mountain of regulation has had the unintended consequence of persuading employers to walk away from final salary schemes altogether.
But of course, it was Gordo's £6bn pa tax credit grab that turned a drama into a crisis. As the FT reminds us this morning:
'Other employers will be tempted to follow Rentokil. The Pension Protection Fund estimates that British companies have a total pension deficit of £134bn. Up to £40bn of that is accounted for by the FTSE-100 companies, with a handful facing deficits greater than their market capitalisation.'
The vast bulk of that £134bn is attributable to the tax grab: £6bn pa capitalised at 5% is about £120bn.
Thanks Gord. Your pensions tinkering and grabbing has trapped millions in what are effectively defunct run-off funds. We will be squeaking for the rest of our lives.
Posted by Mike D at 8:06 am