Rentokil Initial, the pest control to security group, unveiled controversial plans to close its final salary pension scheme to existing members yesterday, setting it on a potential collision course with 3,000 of its employees and their unions.
The news emerged as the company announced plans to eliminate its £325m pension deficit within the next six years, paying £200m into the fund immediately.
However, it also admitted that its plans involved removing future benefits from the 3,000 employees who are still in the scheme by next summer - a move which is almost unprecedented among the UK's largest companies. Ernst & Young and the Big Food Group are two of the only other major companies to have attempted a similar move in the UK in recent years.
Andrew Macfarlane, the company's chief financial officer, said the company would consult with workers before pushing ahead with the plans, and stressed that the move would affect only 3,000 of Rentokil's 48,000 employees.
Naomi Cook, the pensions officer of the GMB union, said: "We're appalled at any company closing its final salary scheme to existing members who have signed up for a job that had a final salary scheme attached and who would now view this as a breach of their terms and conditions."
Rentokil closed its final salary scheme to new members four years ago, since when its deficit has grown to become one of the largest in the country. The group conceded yesterday that after a full review of the scheme, it now needed to allow at least an extra £24m for predicted increases in longevity, adding that the total cost of closing the deficit would probably be £370m to £380m
The move comes in response to new pension regulations introduced this autumn, which stipulate companies with the financial capability must put plans in place to reduce their deficits as soon as reasonably possible, and must take no longer than 10 years. The new rules also force companies to calculate their deficit on a stricter basis than the previous regime.
Mr Macfarlane said the company felt it was able to make a substantial initial contribution to the fund after raising some £325m from the sale of its style conferences division last month.
The Pensions Protection Fund last week encouraged schemes to tackle their deficits as a means of reducing the levy which they must pay to the PPF.Reuse content