Thousands of employers continue to maintain high-quality pension schemes, but there is a real danger that, as the cost of provision rises, the level of provision will fall Christine Farnish, NAPF chief executive

The National Association of Pension Funds said a total of 84 final salary schemes were closed to new members in 2002, up from 46 last year.

The figures spell more bad news for British workers, who have seen the value of their retirement savings fall steeply in recent years because of a slump on the stock market and a tougher economic environment.

Final salary schemes, which guarantee a pension equivalent to a fixed proportion of workers' final wages, provide a more generous retirement income than alternative defined contribution schemes, which are tied to stock market performance.

UK PENSIONS IN CRISIS Key pension facts and figures at a glance In pictures

Shortfall

Most of the companies to have closed their final salary schemes have done so because diminishing returns on stock market investments have made it too expensive to top up their pension funds to the required level.

The bulk of those companies are offering their employees defined contribution schemes instead.

The latest NAPF report highlights the gap between the two types of savings plan, with employer payments to defined contribution schemes coming in at 6% of salary this year, compared with 12% for final salary schemes.

The report also suggests that the trend towards final salary scheme closures could continue, with 95% of firms saying their pension schemes had become more expensive to maintain than five years ago.

Age gap

Many employers expect the retirement age to be raised from 65 to 70 by 2030.

However, the survey showed that about 24% of firms polled had taken contributions holidays in 2002, in a sign that many occupational pension schemes are well-funded.

The report comes ahead of a green paper outlining the government's strategy for resolving the UK's pensions crisis, due out next week.

"Thousands of employers continue to maintain high-quality pension schemes, but there is a real danger that, as the cost of provision rises, the level of provision will fall," said NAPF chief executive Christine Farnish.

She urged the government to simplify pension regulations as part of its overhaul strategy.