Sir Stanley Kalms, the chairman of Dixons, yesterday blamed the controversial new FRS17 accounting standard for the retailer's decision to close its final salary pension scheme to new members.
Dixons is among a growing number of companies to have shut off membership of generous defined benefit pension schemes to new employees. The schemes guarantee a pension based on an individual's final salary, and many have fallen into deficit because of poor stock market returns, falling interest rates and increasing life expectancy.
FRS17 is viewed as aggravating the problem by requiring companies to register deficits on their balance sheets, creating the possibility of hefty one-off charges against profits.
Sir Stanley described FRS17 as a "a stab in the heart of final salary schemes". "[FRS17] is having a devastating effect on pensions. The whole pensions movement is under massive pressure," he said. "No one ever costs legislation, they just introduce it."
The schemes were a major attraction to new recruits, he said. Employees of Dixons, Currys, PC World and The Link will no longer be allowed to join the scheme if they started after 1 March, but will be offered membership of a money purchase scheme instead. The level of payout from these schemes depends on the performance of the stock market.
Dixons, which employs 28,000, said FRS17 was among several factors behind the move. "Staff in the retail industry tend to move around a lot. For some employees, there are advantages in a money purchase scheme," a spokesman said. "The main reason for [closing the final salary scheme] is that it gives greater certainty."
The business community has been criticisedbyunion leaders for using FRS17 as an excuse for closing final salary schemes. The Accounting Standards Board is jointly funded by business, the accountancy profession and the Department of Trade and Industry.
FRS17 does not come into force until 2004. Companies that have done the same includeMarks & Spencer, Abbey National and Iceland.Reuse content