Whitbread, the owner of Costa Coffee and Premier Inns, yesterday joined the growing band of companies to have closed final-salary pension schemes to existing as well as new staff.
The scheme's funding deficit has been soaring over the last year and stood at £233m on 26 February this year, a huge increase on the £33m shortfall it faced a year previously.
However, the company said this funding gap was not the reason for the scheme's closure, which will affect around 800 staff, or 3 per cent of the company's workforce.
Whitbread also said it planned to improve pension benefits for other staff members and extend to a further 14,000 employees eligibility for its money- purchase pension – where the returns, and therefore the retirement income, depend on the performance of investments and annuity rates.
Lesley Williams, pensions director at Whitbread said: "The changes will bring the pension benefits across the business into line and ensure that we offer fair pension benefits to all.
"Extending eligibility for the Pension Fund and improving the level of employer contributions will continue to ensure attractive benefits for Whitbread employees and for those joining the business."
Pensions experts have predicted that many more companies will follow Whitbread's example. Barclays is consulting on a similar move, although banking unions have threatened to call a strike ballot. Wm Morrison, the supermarket chain, IBM UK, the technology company, and builder Costain have all announced plans in recent months to wind down their schemes.
Choppy investment conditions and retirees' rising longevity have left huge funding black holes and made pension schemes just too expensive for firms to maintain, experts say.
By contrast, the Government has effectively guaranteed the final-salary schemes at Bradford and Bingley and Northern Rock, under state control.Reuse content