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FSA decides pay on pension type; the body has cut rises to final-salary scheme members.

Document Cited in Related
Vincent
AuthorHayward, Cathy
PositionReward

The Financial Services Authority, the regulatory body that oversees corporate governance, is to award lower pay increases to members of its final-salary pension fund than to employees on its riskier money-purchase scheme.

The 900 employees in the watchdog's final-salary scheme will receive average pay rises of 4.2 per cent, whereas members of the money-purchase scheme will receive 6.7 per cent. The watchdog blamed the cost of the final-salary scheme, which has grown from 4.7 million [pounds sterling] in 2001 to 10.2 million [pounds sterling] in 2003. It was also concerned about its growing pension deficit, which stood at 31 million [pounds sterling] for the year ended 31 March 2002, but is believed to have risen further since then.

The FSA is believed to be the first employer to adopt a two-tier scheme for its employees and the move was heavily criticised by Unifi, the finance trade union. It warned that other companies with pension fund deficits would follow suit. But Feargus Mitchell, partner in human capital advisory services at Deloitte and Touche, said this was unlikely. "Many firms will find dual pay schemes difficult to stick," he argued. "We encourage our clients to think about total remuneration and not pensions in isolation, but employees tend not to see it that way."

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