Will workers face pensioner poverty

Adrian Boulding, director of pensions strategy at insurer Legal & General, told the Pensions Policy Institute that firms attempting to cut costs would "inevitably" move towards closing schemes to new recruits.

In future, employees would be entitled to pension benefits already built up, but new recruits may be increasingly shunted into money purchase scheme where employees shoulder investment risk rather than employers.

As a result, Mr Boulding said that within seven years many UK firms would have a two tier pension culture - a minority of long serving employees enjoying final salary rights but with the majority tied into money purchase schemes.

Shrinking schemes

Final salary schemes are sometimes called "defined benefit" schemes.

This is because the benefits are set out by the employer before a member joins the scheme.

The stock market falls of recent years have meant that the total assets held by many company schemes have shrunk.

If assets fall below liabilities then employers are duty bound to prop up ailing final salary schemes in order to ensure that members are paid their benefits in full.

As a result, many employers have closed their schemes to new recruits, increased employee contributions, or simply wound schemes up.

Mr Boulding said that it was inevitable that said it is "inevitable" that firms would go further and push out members - Legal & General has closed its pension final salary scheme to new members.

In February, human resources consultancy Mercer warned that a "second wave of cuts" was on the way with an increasing number of employers predicted to abandon their pensions schemes altogether.