Pension woes are marketing woes

For the last year I have been moaning on about the connection between the crisis in pensions and its knock-on effect on business. Yes, I know it is all about obtuse but it is so important.

There is an article in today’s FT that contains some horrible facts. The FT is a paid subscription paper.

The true cost of today's index-linked, final salary pension schemes has been revealed. It is a price most businesses no longer feel able to pay.

This is an international phenomenon. In the US, as in the UK, companies have been closing final salary schemes to new employees for several years. The move from "defined benefits" (DB) to "defined contributions" (DC) schemes is a familiar one. But a new squeeze is on as employers look to move more workers into so-called 401(k) or personal pensions.

IBM and Verizon are the latest leading US employers to announce they will be freezing pension arrangements for all staff. Both companies are likely to save up to $3bn over five to 10 years. Instead of maintaining their current schemes, they are inviting staff to increase contributions to their own pensions.

In the UK in December, Rentokil became the first FTSE?100 company to freeze its DB pension for existing as well as for new employees. Its pension fund is in deficit by £325m. In total, the pension funds of all FTSE?100 companies are estimated to be in deficit by about £75bn, according to accountants Deloitte and Touche.

Why is this important? If the state or your employer doesn’t pay your pension, then you do. If you do, you have less money to spend on consumption. If you have less money to spend on consumption, you are causing some marketer a problem. End of rant!Dick Stroud