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UK final salary pensions hitting company investment: study

City workers cross a bridge in Canary Wharf, east London August 30, 2012. REUTERS/Olivia Harris
City workers cross a bridge in Canary Wharf, east London August 30, 2012. REUTERS/Olivia Harris

LONDON (Reuters) - The financial burden of running final salary pension schemes is hampering companies' ability to invest in expansion and development, according to UK research published on Tuesday.

A survey of 226 chief executives and board members in companies carried out by UK business organization the CBI and insurer Standard Life found more than two thirds reported the cost of so-called defined benefit pensions is stifling business investment.

Among manufacturers, the figure rises to 78 percent, the report said.

Defined benefit pensions pay out an income to scheme members on retirement amounting to a proportion of their final salary, depending on how long they paid into the scheme.

Many such schemes are now closed to new members as the cost of running them is proving prohibitive to companies as retired employees increasingly live for many decades after retirement.

Most private sector pension savers now have to sign up to schemes run on a so-called defined contribution basis, whereby the responsibility for funding retirement and longevity risk is placed entirely on the employee.

(Reporting by Chris Vellacott; Editing by Mark Potter)

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