LONDON - Even as the pensions' conundrum shows no signs of getting solved, Scottish & Newcastle PLC announced that it would not be discontinuing its final salary scheme, but did add that employee contributions to the same would increase from April 2006.
These contributions are to the tune of 6 percent of pensionable pay. S&N will also offer the existing final salary pension scheme members the option to join 'Career Average Salary' scheme.
Under this scheme, members have the option of making no contribution or making 6 percent contributions and their final payout will depend on this scheme. S&N's employee council has accepted these changes in the pension scheme. Revealing these changes, John Dunsmore, S&N's UK managing director said, "It is well documented that final salary pension schemes are under threat in businesses across the UK and our pension fund has required significant cash injections. I am therefore delighted that we have been able to find a solution that retains the final salary scheme for those who wish to remain within it." Last year the firm had contributed £200 million to the pension scheme.
Top companies are rethinking on their pensions strategies after being faced with big pension-fund deficits. Actuaries at Deloitte said that the overall deficit of the FTSE 100 companies has hit the £110 billion mark over the last two weeks.
"What a difference two weeks makes. This is a direct result of the 'double whammy' that we always feared - a rise in inflation expectations and a fall in bond yields," said Tony Osborn-Barker, a director at the firm. Faced with these problems many companies are actually withdrawing their final salary schemes. Rentokil and Arcadia have already informed that they would not continue with these schemes and many companies are expected to follow suit.
Posted
on : Sun, 22 Jan 2006 20:25 GMT | Pensions News
By : Anne Philips
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