Finance in brief

Widows drops final salary

SCOTTISH Widows became the latest Scottish company to close its final-salary pension scheme to new members on Friday when it announced the introduction from January of a money-purchase arrangement.

Instead of guaranteeing a pension linked to final salary, under the money-purchase arrangement the final pension will depend on the performance of pension-fund investment funds as well as on the amount invested by the employee and the company. In other words, there are no guarantees of what might eventually be paid.

The new plan, including death-in-service and disability pension benefits, is identical to those provided to new staff joining other Lloyds TSB Group companies. Those who are already members of the existing final-salary scheme will not be affected.

New rule on insurers' fines

THE Financial Services Authority has ruled that, from November 1, any fines imposed on life insurance companies for misconduct must be paid for by shareholders, not out of long-term or with-profits funds.

FSA chairman Howard Davies said on Friday: "In the past firms have paid fines out of long-term funds. We proposed this rule change as we believe that, where possible, fines imposed on a firm should be paid by its owners rather then by its policyholders." Insurers back annuity plans

HOPES of radical reform of the rules forcing pensioners to buy an annuity by the age of 70 were dashed again last week when the Association of British Insurers (ABI) backed the government's stance that an annuity is the best way to provide a secure pension.

However, it also called on the government to allow the money-back annuities, which would allow a pension pot to be repaid to a policyholder's family should he or she die soon after retirement.

Copyright 2002 SMG Sunday Newspapers Ltd.
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