Steve Bee: outrage over final salary closures is mis-placed

One of the problems with any kind of scheme based on investments is that as well as saving for your pension you are also probably keeping a number of advisers associated with your investments in relative luxury.

Far from having any control, you are also at the whim and fancy of such people who appear to be as ignorant as the rest of us when it comes to predicting what will happen. None of them appear to have a mind of their own. They all either proclaim that it's never been so good, or it's never been so bad, but few if any will stick their neck out at any one time and predict when things will get better or worse.

At least with a pension based on final salary you know where you stand, and that other people are not constantly dipping their fingers into your otherwise ever decreasing pension 'pot'.

I bet Steve could really afford to buy a tie for himself if he really wanted to, possibly out of the money he makes advising others how to maintain his salary?

Steve makes a valid point in saying that the real problem is the amount of money invested rather then the scheme design itself. That said, I do believe that this article undervalues and undermines the value of a guarantee element.

If we assume that TWO schemes operate on the same investment levels, where one is Money Purchase and one is Defined Benefit, the latter is still the superior because although it does not benefit from above-calculated investment growth, it carries solid guarantees which far better enable the employee to budget and plan ahead. Furthermore, one could argue that even above-avaergae growth does not enhance the former money purchase arrangement, since such an occurence in defined benefit could lead to a payment holiday, allowing the employee to invest elsewhere.

That said, Dave, your comments seem a little mis-placed here. Believe it or not, Defined Benefit schemes have to be run by trustees, which (guess what!) need to be paid and kept in, as you call it, "relative luxury". ANY scheme has to be managed on some level and defined benefits require MORE fingers dipping in the pot because apart from trustees managing the spread of investments, actuaries must also be employed to calculate the investment levels required and make appropriate adjustments. This is one key reason why Defined Benefit schemes can prove so expensive.

In actual fact, a money purchase arrangement is cheaper to operate so for the cynical and (forgive my bluntness) slightly ignorant "Why should I pay someone to look after my money?" minded, the money purchase is actually a better option. The truth is, although YOU personally may not pay extra for the costs of a final salary scheme, the employer does on your behalf. So really, this argument is null and void.

In reality, any scheme, regardless of design, can only be as good as the investment paid in and in this respect, Steve is spot on. That said, it is right to consider Defined Benefit schemes as superior and I for one can only say it is sad to see them close on such a mass level in the private sector.