Final salary pension schemes and career decisions

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Dr Denise Taylor

29 October 2007

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In years gone by when people stayed with a company long term, the final salary scheme was common but still an incentive to stay with a company and to pursue a career within that company.
Over the years many companies have closed their final salary pension schemes and the pension scheme is now becoming a key factor in whether people take on a new job, or stay with their current one.
When people leave a company and opt for deferred pension benefits, their accrued pension benefits will be increased in line with inflation. Currently the cap is 5% but the Government wants to reduce this down to 2.5%. As the past year saw the retail prices index (RPI) rise to 3.9%, over time the value of the pension will fall.If these changes are introduced any one who has already deferred a pension has their benefits under the old rules protected.
So do you stay or go?
I’m not a financial advisor but it looks like you need to weigh things up carefully before making a decision. What will be the benefits of staying with your company -maybe the pension compared with the downside – unhappy in your job and lacking career satisfaction.
At least the benefits you have already gained can’t be changed.  When you look for a new job you will want to understand the benefits on offer and probably seek pension benefits as part of your negotiations.
I know a few people who work for the Post Office who have been staying in an “ok” job because of the pension benefits, but when these are reduced they may well leave. I also know a couple of people who have joined the public sector purely for the index linked pension, they may well move on if things change.

I’d be very interested in any comments you would like to make, Denise

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