LONDON - Scottish Power PLC joined the list of top companies to announce that it would not be extending the final salary pension scheme to new recruits. Instead the Glasgow-based Company will offer a defined contribution scheme to new members from April this year.
This scheme will depend on the performance of the company in the stock market and does not define the final level of pension that will be available to a worker. Current employees may also have to contribute more to the pensions’ scheme, which is reportedly in the red by about £150 million. "Like the schemes of all big companies, Scottish Power's is under increasing funding pressure as people live longer and investment returns slow," said a spokesperson for the company. "Though the overall deficit is relatively modest it must be tackled, and the company is taking action by increasing funding and accelerating repair to the schemes."
Scottish Power employees who are on a final salary pension scheme would have to contribute at a rate of 7 percent instead of the existing 5 percent over the next four years. The spokesman added that around 7,600 employees were 'protected' from any hike in their contributions since they had joined before 1990.
Unions are threatening industrial action over this move from Scottish Power, "Scottish Power is a successful and highly profitable company, and its decision is not about the problems facing many final salary pension schemes, but about the likely sale of the company and the subsequent shares that the board of directors will be entitled to," alleged Dougie Rooney, of the Amicus union.
"Amicus opposes this decision and will resist the plans. We will be consulting with our members on what action they are prepared to take to defend their pensions." Last November German firm E.ON AG had withdrawn a bid for Scottish Power, but analysts say the German company could be back if any rival tables a bid.
Posted
on : Fri, 13 Jan 2006 07:55 GMT | Pensions News
By : Mark Richardson
|
