Private sector defined benefit schemes are closing more rapidly than realised, meaning the incomes of newly retired workers are set to fall at a much more dramatic rate in the coming decades than had previously been thought, according to consultancy LCP.

A report from the firm found in the private sector the decline of traditional final salary-type pensions is more rapid than previously assumed, while the rise of new ‘pot-of-money’ workplace pensions will take longer to make a real impact than previously expected.

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Together, these two factors have combined to create a downward slope in at-retirement incomes that LCP has dubbed “the ski slope of doom”.

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Until now, the working assumption of policymakers has been that the historic legacy of final salary pensions will largely tide people over until new workplace pensions — bolstered by automatic enrolment — take their place.

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The consultancy’s analysis, based on new modelling from a range of data sources, argues that this assumption is wrong for three reasons.

The first is that past modelling has “lumped together” around 6m public servants, who are still building up good salary-related pensions, with tens of millions of private sector workers, the large majority of whom are not building up any salary-related pensions.

Second, past figures showing how pensioners as a group are faring relative to workers have been an average over all pensioners, and have not focused just on those retiring today, which disguises the fact that in future the newly retired will be getting steadily worse off.

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