Almost half of all final salary pension schemes will have to shut out new members within five years under the strain of costs introduced by the 2004 Pensions Act, a report from Alexander Forbes financial services has claimed.

The cost of running final salary schemes has risen thanks to the creation, under the act of the statutory Pensions Protection Fund to which employers with final salary schemes contribute.

Their contributions ensure that employees who lose pension funds as a result of unexpected company insolvency receive due compensation.

The report argues that since the introduction of the 2004 Act, 15 per cent of schemes have seen costs rise by more than ten per cent.

Robert Macgregor, corporate development director at Alexander Forbes, said businesses were “struggling” to cope with increased costs under the introduction of the PPF.

The Pension Protection Fund is committed to providing 100 per cent of compensation to individuals who reach their scheme’s normal pension age and a 90 per cent level of compensation to individuals below their scheme’s normal pensioning age.

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