Many British workers are unfairly losing out money as their employers spend millions in a bid to keep their companies' pension schemes afloat, a new report has revealed.
According to data released on Monday (22 May) by the Resolution Foundation, employees could be losing out on approximately £200 ($260) a year on average. Last year, UK businesses spent around £24bn trying to plug their pension funds' deficit, with Royal Bank of Scotland, BT, Tesco, Shell and Unilever among the companies ploughing funds into the schemes.
The think tank added that the current deficit of all defined benefit schemes is thought to amount to approximately £500bn.
The Resolution Foundation warned that young workers were particularly likely to lose out money unfairly, as many were still contributing to a scheme they may never benefit from. Less than two per cent of the 11 million workers in defined benefit schemes are younger than 30 years old and still contributing, while half of the 6,000 schemes in existence are closed to new members and a further third are closed to new contributions.
"This drag on pay has important implications across generations as low – and often younger – earners in affected firms are losing out on pay even when they are not entitled to the pension pots they are plugging," said Matt Whittaker, chief economist at the Resolution Foundation.
"With average earnings still £16 a week below their pre-crisis peak and prospects for a return to strong pay growth looking shaky, it's important that younger and low-paid workers don't take a hit to their pay because of deficit payments to pension schemes that they're not even entitled to."
Last month, Theresa May pledged to protect workers' pensions from the actions of "unscrupulous company bosses" if she is re-elected as prime minister.
May said she would give more powers to regulators to block takeovers which could potentially place the solvency of pension schemes at risk.
The Tories will consider making it a criminal offence for bosses to deliberately underfund pension schemes.
Employers found mismanaging schemes could be hit with punitive fines or be suspended for a period of time.