Shell closes final salary scheme
Friday 06 January 2012
The last company in the FTSE 100 Index to offer gold-plated pensions to new recruits has called time on the perk, it emerged today.
Oil giant Royal Dutch Shell has said that from the first quarter of 2013 new employees in the UK will be offered a defined contribution plan instead of its more generous final salary scheme.
The move is being seen as the end of an era because it will mean that not a single employer in London's blue-chip shares index will offer the kind of retirement package seen as standard 20 years ago.
Unlike final salary schemes, defined contribution plans do not guarantee an income but are dependent on the fortunes of investments.
Shell said the announcement reflected market trends in the UK, which have seen final salary schemes closed, particularly for private sector workers, as people live longer.
Figures from the National Association of Pension Funds estimate that only 19% of private sector final salary schemes are now open to new members, compared with 88% a decade ago.
In the public sector too, proposed changes to gold-plated pensions have been behind some of the biggest strikes in decades.
Shell's scheme is understood to make payments to about 30,000 pensioners and has about 6,500 active employees as members.
It has announced plans to close its final salary scheme to new members in the UK despite it being one of the best funded in the country. According to its last official valuation, in December 2010, it had a reported surplus of £1.1 billion.
Unite union general secretary Len McCluskey said: "This is a disgraceful act, nothing less than greed on the part of one of the world's richest and most powerful corporations.
"Shame on Shell - for where it leads, other corporates will follow."
Shell's final salary scheme will still be open to existing members. But trends in the pensions industry are seeing companies increasingly close final salary schemes to existing members too, with insurance giant Aviva among the best known examples.
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