Final salary pension scheme under review at Prudential

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The Independent Online

Prudential, one of Britain's most high-profile pensions providers, is considering the future of its final salary pension scheme as it reviews the implications of falling equity prices. The news emerged as Safeway, the supermarket group, said it was closing its final salary scheme to new members. It will base pension benefits to new recruits on their "career average salary instead".

Prudential's comments will set alarm bells ringing in the industry as it is seen by many as the bellwether of the pensions business. The issue was raised at the company's annual meeting in central London yesterday when a shareholder, who is also an employee, asked the board whether it planned to keep its existing scheme.

Jonathan Bloomer, Prudential's chief executive, refused to give a cast-iron guarantee. He said: "Along with other companies it is something we keep under review. We haven't got any current plans or proposals. But I can't see us ever closing the scheme to existing members. It (the final salary scheme) is something we keep under review given the (economic) conditions."

Companies such as Dixons, J Sainsbury and Marks & Spencer have already ended their final salary pension schemes which have become expensive to run in an era of falling equity prices and increasing life expectancy. Iceland and Enrst & Young have gone a step further in ending their final salary schemes for existing members as well as new recruits.

The shareholder question was one of many that put the Prudential board on the back foot at its AGM which came a day after the group had been forced to shelve plans to introduce a new bonus scheme after intense shareholder pressure. The plan could have netted Mr Bloomer up to £4.6m in bonuses.

One shareholder, Lawrence O'Donohue, said: "In Latin, 'bonus' means 'good'. There has been absolutely nothing good about the way this matter has been handled by the group and the remuneration committee."

Another said of the scheme: "I hope it never sees the light of day again."

Another private investor lamented the group's financial performance: "In 2000 the share price was £12-plus," he said. "Now it's £7. What are we doing? What are you doing? Should you not all go?"

Sir Roger Hurn was also attacked after saying in March that he would step down as chairman to avoid any impact on the group as a result of a forthcoming report into the crisis at Marconi, where he was also chairman. One shareholder said the company had taken too long to act.