UK - Roadside rescue and motoring services group RAC has drawn up a 12-year plan to wipe out its £129m pensions deficit.
The firm has calculated that two-thirds of the £400m scheme’s deficit will be eliminated through increased contributions and benefit changes.
The company is resting its hopes on a stock market recovery to fill the final one-third.
Staff contributions are increasing by 4% of salary across the group, subject to individual agreement.
Workers who joined the scheme as non-contributory members – prior to April 1994 – will have to pay annual contributions of 4%. Others will see contributions increase to 8% and, in some cases, 10% of pensionable salary depending on their current contribution rate.
RAC management will be hit harder by the change, however, with contribution rates rising by six percentage points. And the firm’s executives are being asked to pay a further eight points on top of their current contributions. But all workers are able to avoid increased contributions by accepting lesser benefits.
Staff can accept a 1/80th accrual instead of the current 1/60th while executives can opt for a 1/60th accrual instead of a a 1/45th.
The RAC is also increasing its contributions into the scheme, paying out an extra £2.5m this year. This will take its total contribution for 2003 to £23m.
It will increase annual contributions by a further £2.5m in 2004.
RAC group pensions manager David Dugan explained: “What the company has done is look at the deficit and split it into thirds – one third will be accounted for by increased company contributions, one third by reducing benefits or staff paying extra contribution and one third coming from recovering markets.
“We are committed to DB. We wanted to keep the scheme open to new employees and give members choice.”
Dugan said that every April members would be able to choose whether they wanted to change their contribution/benefits arrangement.
Jonathan Stapleton asks whether newly-accredited professional trustees should be a statutory fixture on pension scheme boards.
Savers are being warned by the Insolvency Service to guard their pension pots from investment scammers and negligent trustees as it winds up 24 companies.
Respondents say they should only be required in certain situations as the system is not broken.