UK - Energy company Scottish Power has joined the tide of blue chip companies to announce plans to close their final salary schemes to new members.
The announcement follows the news that the Co-operative group, Arcadia and Rentokil are all seeking to either close or scale down the costs of their final salary schemes.
When asked if the decision had been influenced by the actions of its FTSE 100 counterparts, a spokesman for Scottish Power said: “It is effectively for the same reason.”
The decision had been based on two basic facts, that people are living longer and that investment returns are in decline, he continued.
“You combine the both and it’s unsustainable. So this move is to protect existing members and to offer new members a competitive package.”
From 6 April all new employees will enter a defined contribution arrangement into which they and the company will each make a 5% contribution.
The contribution rate for 60% of the 7,600 employees in final salary schemes will increase by 2% over four years at a rate of 0.5% per year. The remaining 40% of members are unaffected because they were with the company before it was privatised.
Scottish Power will also revise its retirement age from 63 up to 65.
The company added that it intends to repair its deficit, £150m under the FRS 17 standard, by increasing funding through standard revenues over a five-year period.
In response, the Amicus trade union said it was “appalled” by the planned scheme closure, and by the decision to raise contribution rates for many of the scheme’s existing members.
It said the decision was, “cynical, driven by the board of directors efforts to prime the company for sale, which will result in lucrative share options for them.”
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