Pilkington Tiles yesterday revealed plans to close down its final salary pension scheme entirely and switch the 150 employees currently on the scheme to a riskier plan as it struggles under a £7.2m deficit.
Employees on the final salary scheme - closed by the company to new members in 1996 - would retain the benefits they have already earned but would not gain any further rights. They would be asked to pay into the company's defined contribution scheme, which means the rest of their pension, instead of being guaranteed, would be determined by how their investments fared on the stock market.
Research last week from the National Association of Pension Funds (NAPF) shows that less than one in five companies now have a final salary scheme open to new staff and only Big Food Group, Maersk and Caparo have shut down their final salary schemes in their entirety.
Pilkington Tiles' scheme's deficit now stands at £7.2m. The company currently pays £600,000 a year into its final salary scheme, but said yesterday that increasing contributions would be financially difficult for the firm.
"In common with many companies, we have a deficit. It is purely a result of the downturn in the stock market," Mark Hesketh, finance director at Pilkington, said yesterday. "We are closing the scheme. We will be consulting with staff."
Many commentators fear that full closure is only a matter of time once a company shuts its doors to new members, as the move does not do enough to curb spiralling costs. "It is a legitimate worry that companies that closed their schemes a while ago are now finding costs are still putting them under so much pressure that they have to close the scheme altogether," a spokeswoman for the NAPF yesterday said.
David Willetts, the shadow secretary of state for Work and Pensions, said the news that the final salary scheme would be shut down entirely was a "worrying development".Reuse content