Twin pensions pillars under fire

TWO of the pillars of occupational pension schemes - inflation protection and benefits for widows - will come under fire when the long-awaited Pickering Report is published on Thursday.

Alan Pickering's inquiry into pension regulation for the Department of Work and Pensions recommends that employers should no longer have to lift pension payments to take account of rising prices, and should no longer be obliged to provide benefits to employees' surviving spouses and children.

Details of the report were given to the Financial Times today in what Pickering's office described as 'an unfortunate leak'. He is trying to stop employers axing final-salary pension schemes by reducing their rocketing costs - scrapping index-linking and widows' benefits would do that.

The removal of these benefits would not be retrospective but could apply to new scheme members and to future benefits accrued by existing members. Pickering says in his report: 'This might seem to be a consumer loss but it is better than an employer faced with unsustainable costs...having to close the scheme altogether.'

Dozens of employers are abandoning final-salary schemes for new staff because rising longevity and falling investment returns have sent the costs rocketing.

The Financial Services Authority said it may close its final-salary pension scheme after large falls in the value of the fund. It said it was consulting its 2,100-strong staff, half of whom are in the scheme, and would reach a decision by the year-end.