Speaking on Radio 4’s Today programme, Ian Farr, chairman of the Association of Consulting Actuaries (ACA), said that many companies had switched from final salary to money purchase schemes.

“As a result you have schemes where the employer has taken all the risk associated with investment and longevity under final salary schemes, whereas under money purchase schemes all these risks had been shouldered solely by the members,” he explained.

However, the ACA has called for the introduction of “conditionally indexed” pension schemes, under which employers and employees share the risk.

This, Mr Farr claimed, would offer a “more stable platform” for providing income in retirement than is currently offered by money purchase schemes.

In related news, a recent survey carried out by Baring Asset Management revealed that 12 million people have never reviewed their pension plans.

Michael Hughes, chief investment officer with the firm, said hat the findings were “very worrying” and suggested that many people could be risking a “serious shortfall” when they enter retirement.

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