FT letter
final salary pensions confidence trick July 2005

by Dr. Ros Altmann

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Sir

Martin Wolf’s pertinent analysis of the demise of UK final salary
pension schemes should be extended to highlight the role of
Government, alongside employers, in the ‘confidence trick’ and the
devastating effect on scheme members. Governments were relying on
employers to share the social welfare costs of pension support, in
order to reduce future state pension spending. Members – especially
in contracted out schemes – were relying on this too. Careless
oversight of final salary schemes, recklessly inadequate official
funding standards and Government assurances of protection, which
never mentioned the risks of not receiving promised pensions, lulled
members into a false sense of security. Even the FSA said final
salary pensions were ‘guaranteed’. This allowed employers to get
away with making the promises they could not keep. Meanwhile, tens
of thousands of members, despite decades of pension contributions,
are finding their retirement security shattered by this charade.
Government must acknowledged its responsibility, own up to its
mistakes and compensate those who believed the false assurances of
safety. The failure of final salary schemes is the fault of flawed
UK pension policy, not just employers.