Grant Thornton, the accountancy firm, has cheered the FSA's decision to decrease pay rises to staff ...
Grant Thornton, the accountancy firm, has cheered the FSA's decision to decrease pay rises to staff who are members of its final salary scheme in a bid to avoid closing the scheme completely.
This firm is pleased with the FSA's move and says that the decision is not only one that is hard to make, but also one that would, if avoided, increase inequality between employees.
Grant Thornton is backing up its response by referring to figures, published by the Association of Consulting Actuaries, showing that 72% of final salary schemes are closed to new members and that the overall average money purchase contributions are approximately half of final salary schemes.
"With employers gradually closing their final salary pension schemes to new entrants, new employees can only join a money purchase pension scheme. In most cases, the employer's contribution to a money purchase scheme will be a lot less than to a final salary scheme, thus creating an inequity between workers dictated by when they joined their employer," says Patrick Storey, partner within Grant Thornton's Financial Markets Group.
"In practice, a growing number of workers in the UK have a total benefits package worth a lot less than some of their workmates in a similar role, a disparity that a two tier pay rise system can help re-balance."
The City regulator will encounter criticism for its decision, says Storey, but summing up the benefits derived from the settlement employees should embrace the FSA's action.
Even though these implications need to be outlined carefully, this is a path that other employers should seriously contemplate, adds Storey.
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