Philip Green, the retailing billionaire, found himself on a collision course with Britain's trade unions yesterday, after announcing plans to force hundreds of his employees to either work longer and increase their pension contributions, or take cuts in their retirement benefits.
The move comes just months after the tycoon paid himself a £1.1bn dividend from the profits of his Arcadia fashion empire - which includes high street chains such as Topshop, Burton and Miss Selfridge - but made no additional contribution to the group's final-salary pension scheme.
According to its most recent accounts, posted at Companies House, the group's closed final-salary scheme had assets of more than £600m in August and a deficit of just £11.6m. Although Mr Green could have wiped this out with just a fraction of his bumper dividend, the company decided to force its existing and former employees to take the strain.
In a memo to staff, Arcadia said employees in the final-salary scheme would now not be able to draw down their pension until 65, rather than 60, and would not receive the same level of inflation-proofing as is currently offered. Previously, Arcadia staff pensions were protected from any inflation up to 5 per cent a year. Under the new rules, protection will be extended only up to 2.5 per cent.
Employees have also been told they will have to increase their monthly contributions to the scheme significantly - from about 4 to 6 per cent of their salary - to maintain their expected level of benefit. If they do not agree, they stand to lose as much as 20 per cent of their expected pension.
Usdaw, the retail union, said it was shocked with the way Arcadia staff were being treated. It has requested a meeting with Mr Green to try to persuade him to change his mind.
John Hannett, Usdaw's general secretary, said: "Our members at Burton have already raised concerns about these changes that could make their retirement less financially secure. We've written to the company expressing the deep concerns of our members that they will need to work longer and pay a half more each month just to have the same pension provision when they finish work. We want to find exactly why these changes are justified when the Arcadia pension fund seems to be relatively healthy."
Mr Green said the changes to the pension benefits were the trustees' idea, not his, adding that his company had contributed significantly to the scheme since he bought Arcadia three years ago. "There is no significant deficit and when the dividend was paid, advice was taken ... and there was considered to be no issue," he said. "Changes in the scheme were in discussion long before I bought the company - and when I bought it no contribution had been made for 10 years. We're now making contributions of £7m or £8m a year."
Recently some companies have made large cash injections to their schemes; others have made employees bear the brunt of the funding problems. Yesterday, the Co-op said it would be changing its final-salary schemes to career-average schemes.Reuse content