By Sarah Toyne BBC News Online's personal finance reporter

The Occupational Pensions Regulator has told BBC News Online that she believes some of the recent decisions to close final salary pensions schemes in the UK have been motivated by the self interests of company directors.

If companies are closing their final salary schemes, competitors will think 'is there possibly an edge in doing the same'

Harriet Maunsell

Her comments are likely to stoke the fierce debate over pensions regulations and moves by numerous firms to rid themselves of costly pension schemes.

Speaking exclusively to BBC News Online, pensions regulator Harriet Maunsell said closing down final salary schemes simply shifted the financial risk from employers to employees.

Mrs Maunsell is the chairman of the Occupational Pensions Regulatory Authority (Opra), which oversees company pension schemes.

Forcing employees out

According to Mrs Maunsell, pensions nowadays contribute relatively little to retirement planning of many directors. They rely instead on share options and other investments.

"I think it is a fact of life that if you are not part of something that is financial, you are not going to be quite so passionately concerned about it. Are you?," she told BBC News Online.

It is transferring the burden of the investment return from the employer to the employee

Harriet Maunsell

"If share options schemes are more important than pension schemes, that is where the board of directors are going to focus", said Mrs Maunsell.

Over the past 18 months, an increasing number of companies have closed down their final salary schemes - which guarantee employees up to two-thirds of their final salary as retirement benefit.

Instead, staff have been enrolled in so-called money purchase schemes, which usually generate lower returns.

One of the main reasons given by companies for the change is a new accountancy standard - FRS17. The new rule forces firms to show pension fund deficits on their balance sheet - and therefore can push down the company's share price.

Directors don't depend on a pension

Mrs Maunsell said as a result some directors were more likely to close final salary schemes and cut back on contributions, rather than upset shareholders - and their own share options.

She added: "If the board is not involved in the pension scheme, then it is far more likely that the board will see the pension scheme as not referable to them and therefore look at it far more objectively and less personally.

"And if they see the costs going up from 20% plus, they may well say 'well surely it would be cheaper to run a less expensive type of scheme'."

Pension cutbacks are a fashion

There has been a steady decline in the number of final salary schemes offered by companies.

The National Association of Pension Funds' annual report found that 46 companies closed their final salary schemes to new members during the year to October 2001, compared with only 18 the year before.

In addition, 13 companies closed final salary schemes to existing members, transferring them to money purchase, compared with six in 2000.

Depending on how you regard the relationship between the employer and employee, closing down final salary schemes could be regarded as entirely appropriate or a derogation of duty by the employer

Harriet Maunsell

Mrs Maunsell said the cutbacks were a "fashion", but they would not spell the end of final salary schemes.

"If other companies are closing their final salary schemes, competitors will think 'is there possibly an edge in doing the same. Should we not be considering this as well?'," she said.

She is convinced that the numbers of final salary schemes will increase again, once economic and financial circumstances change and directors re-discover them as a "way of attracting employees".

Double whammy

Mrs Maunsell also believes that companies are acting on a fallacy.

Companies often believe that money purchase schemes are less difficult to administer than final salary schemes. This, however, was not the case, she said.

But she said the cutback in final salary schemes and reduction in contributions would have "a double impact" on employees.

"It is transferring the burden of the investment return from the employer to the employee.

"Depending on how you regard the relationship between the employer and employee that could be regarded as entirely appropriate or a derogation of duty by the employer."

Regulation

Harriet Maunsell OBE

Chairman of the board of Opra Formerly deputy chairman of the Occupational Pensions Board (OPB) Retired partner of law firm Lovell White Durrant Former member of both the legal panel of advisers and the Council of Opas (Pensions Advisory Service) Appointment expires on 31 March 2006

The government is conducting a number of reviews into the pensions industry.

Mrs Maunsell admits that regulation should be streamlined, and welcomes the pensions reviews currently under way.

"I feel we have an opportunity to reconsider regulation in the light of Opra's five years' of experience and consider what kind of regulation is needed".