Government Threatens to Cut Inflation-linked Rises to Pensions

The Government has suggested replacing final salary pension schemes with a flexible plan that could scrap inflation linked rises if not properly funded

Emma Wall 8 November, 2013 | 3:24PM
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Workers lucky enough to be saving into a final salary pension scheme are in for a nasty shock. In a final salary pension scheme, a type of defined benefit scheme, your pension pot is determined by the salary you earn rather than the contributions you have made during employment.

But the Government is considering scrapping these so-called 'gold plated' funds and replacing them with Flexible Defined Benefit schemes which will be able to change the terms of your retirement savings plan if it does not have enough money. 

Flexible elements would include increasing the scheme pension age, forcing employees to work for longer and not increasing payments in line with inflation. 

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Emma Wall  is former Senior International Editor for Morningstar