This month saw the end of an era in British corporate life. After decades of sending its employees to the most dangerous corners of the globe in search of oil — with only the thought of their families and the promise of a guaranteed income in their declining years to sustain them — Shell U.K. became the last FTSE 100 company to announce that it was closing its final salary pension scheme to new members. People joining in the future would no longer receive a fixed income based on their pay rate at retirement. 

Only days later observers were reminded of why final salary and other defined benefit schemes are on their way out. The Pension Protection Fund, which is charged by the British government with keeping defined benefit schemes sufficiently funded, revealed a record combined shortfall for U.K. schemes of £277 billion at the end of December — more than four times higher than a year before.

Over the past decade U.K. pension funds have been hit first by unfavorable tax changes, then by plunging equity markets and finally by a rise in the value of U.K. government bonds. This has increased the present value of their liabilities, which is calculated using a discount rate based on gilt yields. Many companies have concluded that making up the shortfalls is too costly — leaving closure as the best option.