Debenhams plans to close final-salary scheme

Click to follow
The Independent Online

Debenhams, the department store chain, set itself on a collision course with the unions yesterday as it unveiled controversial plans to close its final-salary pension scheme to both new and existing members.

If successful, it will become only the third major UK company to have taken the unpopular decision to close its final-salary scheme to existing members - joining Rentokil Initial and Harrods.

The company said that it would consult employees, unions and the pension scheme's trustees over the next couple of months, but said it was minded to shut down the existing scheme to all members as it had become too expensive.

Although existing members would keep the benefits which they have accrued to date, all future pension saving would have to be made within a significantly less generous defined contribution scheme - into which Debenhams would only match staff contributions up to 5 per cent of their salary. Debenhams' contributions to the existing final-salary scheme are worth more than twice as much to employees.

A spokesman for the company said yesterday the decision had been taken because the scheme was now fully funded, and was likely to have sufficient funds to pay off all its existing commitments. He said the group had already injected £70m into the scheme over the past couple of years, to repair the deficit, but the management was no longer willing to commit to the expense of a final-salary scheme.

Paul Clarke, a spokesman for the retail union Usdaw, said the unions would do everything in their power to persuade Debenhams to change its mind. "Retail is a poorly paid industry, and, for many people, the offer of a final-salary scheme was one of the attractions of working in it," he said. "Our members can be assured that our pensions experts will be examining why a scheme with no deficit has decided to close, not just to new entrants, but to those who have paid in over a number of years in good faith."

Although dozens of companies have shut their final-salary schemes to new members over the past few years, very few have had the courage to renege on their commitment to existing staff. The doorstep lender Provident Financial forced employees to double their monthly contributions if they wanted to keep their final-salary scheme, while others, such as Friends Provident, have asked staff to retire later.

Rentokil angered unions when it became the first major company to shut its scheme to existing members in December. Derek Simpson, Amicus's general secretary, said the management were as bad as the vermin they were employed to exterminate. Weeks later, Harrods followed suit.