A new survey from the National Association of Pension Funds – the trade body for company retirement plans – says one in four of Britain's biggest employers intends to shut their final salary schemes to existing employees over the next few years.

Three out of four plans which promise pensions based on final salary and length of service are already shut to new employees.

Which companies will close their schemes?

No one knows. The NAPF survey is anonymous but covers most big firms. Companies such as BT and BA are known to have looked at closure as a way of putting a cap on the huge shortfalls built up over the past years (and made worse by the current financial crisis). Some retailers are also seriously considering closing their schemes.

Who will be affected?

Anyone who is still working and contributing to a final salary (also known as defined benefit) scheme when a company closes its retirement plan.

What will happen to them?

The most likely pattern is for members to move to a money purchase, or defined contribution, scheme. With this, you no longer receive a pension based on salary and time in the scheme. Instead, your payout is based on investment performance and the annuity (guaranteed income for life) rate you receive on the day you retire.

What does this mean for contributions?

With defined contribution, a typical firm pays in around 10% of its salary costs into a pension plan – against about 25% into a final salary scheme. Employees could find less of their pay packet goes into pension contributions than under a final salary scheme – but they will almost certainly (there is no guarantee in any of this) end up with lower pensions.

Can you protest against closure?

According to pensions consultants Towers Perrin, firms that close their schemes must allow members a 60-day consultancy period. In one recent case, a strike threat forced the company to retreat and re-instate the old scheme. It may also be possible to negotiate higher payments from the company into your new money purchase plan – especially for older employees. This could sweeten the switch.

What about my contractual rights?

Employment contracts rarely offer a particular form of pension as a legal right. Instead, they will say you will receive a pension without defining its type or its size. But lawyers Sacker and Partners, a pensions law specialist, says: "While in most cases scheme closure is possible, there are legal hurdles to be jumped. Some pension schemes' rules prevent closure to existing employees – so employers should check first whether this can be achieved at all. But where it can, employers will need to consult with affected employees for at least 60 days and give proper consideration to employees' views. They will also need to get the "buy-in" of the pension scheme's trustees to a proposed closure, who would expect to see the employer demonstrating a good business case for going down this road.

What if I have already retired?

A scheme closure does not affect those already drawing a pension – they should continue to receive their money every month. But it could affect any discretionary annual increases or "perks" from the plan. Anyone who has left the company concerned before retirement and has a frozen or "preserved" pension should also escape any change. "Past benefits are respected" says Jonquil Lowe, author of Finance Your Retirement. )

Are there any rays of light?

Not really unless investment markets make a very sharp recovery and continue to outperform. Employers say it could end problems at work where two people of the same age doing the same work could now have different remuneration if one is the pension plan and the other, who joined recently, is not because the scheme is already barred to new staff.

When will closure happen?

Again, no one knows. The NAPF survey talks about the "next few years" but some will move over the next few months.

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