The words 'pension' and 'dull' are often to be found in the same sentence - particularly when it comes to Generation Y, who have many more important things to think about than retirement (who has just poked them on Facebook, are they too late to get tickets for Glasto, was it right that Diversity beat Susan Boyle?).
But ever since Sir Fred 'fat cat' Goodwin refused to reduce his £700,000-plus-a-year arrangement, the legality of which RBS is now reviewing, discussion - and outrage - over pensions has enjoyed a renaissance.
The key debate is around the death of the final salary pension. Next month, in-vogue grocer Morrisons will move existing members of its final salary scheme into a new average salary scheme. I can't blame it. It is already injecting an extra £100m into the scheme on top of £100m last year and, as every retailer or manufacturer with a final salary offer knows, trying to keep it in surplus is like pouring cash into a black hole.
The combined pension deficit of the FTSE 100 is estimated at £50bn. Plymouth & South West Co-operative Society recently voted to merge with The Co-operative Group - in part, said CEO Douglas Fletcher, because it would struggle to correct underfunded pension schemes if it failed to do so (The Grocer, 30 May, p8).
Unfortunately for employees, the move away from final salary schemes is bad news. Morrisons may well benefit from £70m credit, but the 4,500 members of the scheme - new entry to which was barred in 2003 - will end up with a less generous package.
Under the average salary scheme, both employer and employee contribute and the pension grows in line with inflation. Most guarantee to pay 1/60th of the average lifetime salary for each year worked and figures show it is likely to be better for the employee than other measures.
A graduate starting on £20,000 a year and retiring on £50,000 aged 65 would expect a pension of £23,888 a year, plus a tax-free lump sum of £179,166 in a typical final salary scheme, says Standard Life. On an average salary scheme they would get £17,888 a year and £134,167 tax-free. This compares well with defined contribution schemes, which rely on stock market growth. These would achieve £10,612 a year with a lump sum of £89,610. To get near a final salary scheme payout, employer and employee would have to contribute 28% of salary between them. Today's typical contribution is 11%.
So, 12 million workers are not saving enough. If closing final salary schemes and adopting employee contribution schemes, it is vital companies help staff understand they need to contribute more. Gen X can already expect to work until 70. At this rate, Gen Y may never retire.
Siân Harrington is editor of Human Resources.
But ever since Sir Fred 'fat cat' Goodwin refused to reduce his £700,000-plus-a-year arrangement, the legality of which RBS is now reviewing, discussion - and outrage - over pensions has enjoyed a renaissance.
The key debate is around the death of the final salary pension. Next month, in-vogue grocer Morrisons will move existing members of its final salary scheme into a new average salary scheme. I can't blame it. It is already injecting an extra £100m into the scheme on top of £100m last year and, as every retailer or manufacturer with a final salary offer knows, trying to keep it in surplus is like pouring cash into a black hole.
The combined pension deficit of the FTSE 100 is estimated at £50bn. Plymouth & South West Co-operative Society recently voted to merge with The Co-operative Group - in part, said CEO Douglas Fletcher, because it would struggle to correct underfunded pension schemes if it failed to do so (The Grocer, 30 May, p8).
Unfortunately for employees, the move away from final salary schemes is bad news. Morrisons may well benefit from £70m credit, but the 4,500 members of the scheme - new entry to which was barred in 2003 - will end up with a less generous package.
Under the average salary scheme, both employer and employee contribute and the pension grows in line with inflation. Most guarantee to pay 1/60th of the average lifetime salary for each year worked and figures show it is likely to be better for the employee than other measures.
A graduate starting on £20,000 a year and retiring on £50,000 aged 65 would expect a pension of £23,888 a year, plus a tax-free lump sum of £179,166 in a typical final salary scheme, says Standard Life. On an average salary scheme they would get £17,888 a year and £134,167 tax-free. This compares well with defined contribution schemes, which rely on stock market growth. These would achieve £10,612 a year with a lump sum of £89,610. To get near a final salary scheme payout, employer and employee would have to contribute 28% of salary between them. Today's typical contribution is 11%.
So, 12 million workers are not saving enough. If closing final salary schemes and adopting employee contribution schemes, it is vital companies help staff understand they need to contribute more. Gen X can already expect to work until 70. At this rate, Gen Y may never retire.
Siân Harrington is editor of Human Resources.
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