UK - Leisure giant Rank has moved its £36m defined contribution scheme back into the state pension system in order to give members better benefits.
The firm – which owns the Hard Rock Cafe, casinos and film-related businesses – attributed the move to the low rebates offered by the government and the fact that its DC scheme members would get higher benefits as a result.
Rank head of group benefits Julie Richards said: “We’ve contracted our DC plan back into the state scheme as we believe it is in our people’s best interests and better value for money, not from the company’s point of view as it costs us more, but the members will get better benefits.
“And given the way rebates have changed, how the state scheme in general has changed over the years, we feel that now is the time to restructure and put people back in.”
But Richards said Rank had decided against moving its £580m final salary scheme back into the state system. She said that contracting back in would make benefit calculations – which include guaranteed minimum pensions and protected rights – far more complicated.
“We did consider it, but then thought ‘no, it’s not necessarily in people’s best interests and it would be very complex to do’. We thought it’d be better to leave it as it is,” Richards said.
Mercer Human Resource Consulting worldwide partner Peter Thompson (pictured) argued that the complex nature of the state second pension (S2P) makes contracting in defined benefit schemes “too much of a hassle” for most employers.
“When a company switches from DB to DC, in general they contract back in. But with on-going DB schemes, they don’t and it is because the structure of S2P is so complicated,” he said.
“Rebates are not good value and if you are going to make the margin on contracting back in, you have to integrate your scheme benefits fairly accurately with S2P. That will give you such a complicated benefits formula, and frankly, it is too much hassle.”
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