Final salary pensions weigh on UK company performance - survey

LONDON (Reuters) - The costs of managing deficit-ridden defined benefit, or final salary, pension schemes are hitting British company profits, a biennial pensions survey showed on Monday. Eighty-two percent of senior staff at 166 businesses surveyed by the Confederation of British Industry and consultants Mercer said pension scheme costs were having a direct impact on company balance sheets. UK private sector defined benefit pension schemes collectively have liabilities of over 2 trillion pounds, according to consultants Hymans Robertson. Prolonged low interest rates in Britain have left many defined benefit pension schemes in deficit, prompting firms to close them to new members. The combined deficit of the schemes totalled more than 300 billion pounds by the end of September 2015, according to data from the Pension Protection Fund, leaving the schemes only 80 percent funded. This compares with a deficit a little over 100 billion pounds and 90 percent funding two years ago, when the survey was last compiled. "Businesses have highlighted that market volatility is a considerable challenge and, despite increased contributions in the past few years, anxiety over funding levels persists," Fiona Dunsire, chief executive of Mercer, said in the survey. As a result, 21 percent of companies are also closing defined benefit schemes to existing members. Britain's ageing population has also led 78 percent of firms to say they would offer more flexible hours to deal with an older workforce, the survey said. Britain's government, keen to close its own financial deficit, has consulted with the pensions industry over removing upfront tax relief on pensions saving and replacing it with tax relief at the time of pension withdrawal. But 79 percent of respondents said they did not think more change to the pension taxation system should be a priority for the government. (Reporting by Carolyn Cohn; Editing by Mark Potter)