A recent pensions report by KPMG calculates that FTSE 100 firms are now paying as much into their schemes to pay off past deficits as they are paying in  contributions for current employees.

It gets worse. Rather than the traditional model of spending twice as much on new benefits for existing employees than on pension fund deficits, Mike Smedley, pensions partner at KPMG, predicts that that within five years, £4 out of every £5 being paid in would be to clear past deficits.

I’ve covered all the problems of final salary pensions before, most notably in this blog.

Another thing that I would like to add now is that if you are considering leaving an employer and you are a member of it’s final salary scheme, you would be missing out on an employer contribution of around 20% of your pay (before bridging the deficit) if not more depending on the terms of the final salary scheme. This is especially the case in the  public sector where the keep or ditch the final salary pension debate does not seem to take place. In fact, public sector pensions are “unfunded” – that’s pension income paid by today’s tax payer rather than money that has been set aside. So if you do leave this type of employer, make sure you consider how you are going to replace contributions to your retirement.