EDF Energy yesterday bucked the trend of companies closing down their pension schemes by establishing a new final salary scheme for its staff.
The company was created in June after merging with London Electricity and Seeboard Energy. It plans to sweep away the four pension schemes that exist within those companies and replace them with one new scheme, open to all staff.
"We have one company, so we will have one pension scheme," Vincent de Rivaz, EDF's chief executive, said.
The company insists that no one will lose out from the change and, as two of the existing schemes are money purchase plans where final benefits are not guaranteed, many staff will prefer the extra security of a final salary scheme.
Many companies have closed final salary pension schemes because they have become increasingly expensive. A report published yesterday found that guaranteeing benefits, as requested in new proposals by the Government, would cost companies £27bn. Alexander Forbes, a consultant group, warned in the report that the new rules will force companies to raise contributions to £27bn from the £14bn a year they pay now.
Mr de Rivaz said its new scheme would bump up pension costs by about £4m a year, but this was a price worth paying to retain loyal staff.
EDF has 11,000 employees, 5,000 of which are members of the former energy industry pension schemes that existed prior to privatisation. These closed to new members in the 1990s and they are unaffected by yesterday's announcement.
The 3,000 EDF employees in the four company schemes will keep the benefits they have already built up and will be transferred to the new scheme. Another 3,000 employees are not part of the existing schemes. "These are mostly young workers and we want to encourage them to join and let us take some of the burden of providing for their retirement," Mr de Rivaz said.
The news came after a climbdown by Maersk, which on Monday promised to pay the benefits it had promised to staff in full. The shipping group, a UK subsidiary of the Denmark-based AP Moller Maersk, provoked outrage by its decision to wind up its scheme and then only honour obligations to their legal limit.Reuse content