Last hurrah for final salary pension schemes

Employers are moving to close their final salary pension schemes in advance of government plans to raise National Insurance costs.

The insurer Axa said last Thursday it was reviewing its final salary pension provision in the light of the planned change to NI which will go ahead from 2016-17. In a letter to staff, Axa's chief executive Paul Evans said: "Our current pension costs and the future financial burden they place on the company are not sustainable and therefore I know you will understand the reasons for us deciding to launch this consultation process and for starting a review at this time."

Axa added that by 2022 it would cost £137m to keep the final salary scheme open.

Malcolm McLean, a consultant at Barnett Waddington, said Axa could be the first of many employers to react to government plans to end the ability of final salary schemes to opt out of NI, as a means to finance the new enhanced single-tier state pension.

"At current price levels a typical worker earning the average salary of £25,000 will pay an extra £270 a year, with the employer having to stump up £657 per employee," Mr McLean added.