Northern Foods to keep final salary pension plan

Northern Foods, the supplier of ready-made meals to supermarkets such as Marks & Spencer, bucked the trend in the pensions market yesterday when it decided to retain its generous final salary pension scheme.

The company, which sells 30 per cent of its output to M&S, said it would continue to pay an amount equivalent to 10 per cent of its employees' salaries into the group's contributory scheme. The main change is that staff are now being asked to increase their personal contributions from five per cent of pay to seven per cent.

"We believe that a good pension scheme is very popular with employees and it will enable Northern Foods to recruit and retain good employees," explained Jo Stewart, chief executive.

The decision contrasts with moves made by a long list of major UK companies, such as M&S, Dixons and KPMG, which have closed their final salary schemes to new members as a result of falling stock markets and increasing life expectancy.

Northern Foods' current scheme had a deficit of £47m as of March 2002.

The only other change to Northern's pension is that it has removed certain "discretionary benefits". These had previously allowed workers to retire five years earlier than the normal retirement age but still receive their full pension entitlement.

The comments came as Northern Foods announced a 4.5 per cent increase in operating profits to £46.8m for the six months to 30 September. Pre-tax profits doubled to £75m helped by a £54m exceptional gain on the sale of its Ski and Munch Bunch business to Nestlé in the period. The Pork Farms vans operation and Lift lemon tea were also sold in the period. The company closed its Paynes sweets factory in May and transferred production to its Fox's confectionery factory in Leicester.

Like-for-like sales in the half were 5.4 per cent higher than last year. This has fallen to growth of 4.5 per cent in current trading though comparisons are tougher.

Mr Stewart said sales to its top five customers, such as M&S, Tesco and J Sainsbury, grew by 6 per cent. Northern Foods has recently provided M&S with a relaunched range of Chinese and Italian meals as well as filled rolls made with panini bread.

The shares rose 1.75p to 155.5p yesterday.