US - State Street Corporation has closed its defined benefit (DB) scheme to new members and will instead bolster contributions under the company's 401(k) scheme.
The move, announced yesterday, will affect 15,000 workers in the US and comes as other large financial services companies also wind down their DB schemes.
State Street spokesperson, Caroline Cichon, said: “It’s better empowering employees to plan for retirement, it gives them greater flexibility.” She denied that it was a cost-saving initiative and said it was a reallocation of benefit funds from a fixed to variable cost.
When asked whether this would reflect poorly on the company, one of the largest service providers to institutional investors, Cichon said that the move reflected wider trends within the industry and that the exisiting DB plan would continue to gain interest.
Under the new scheme, State Street will double its contribution to 100% of the first 6% of salaries, up from 50% at present. Non-contributing employees will automatically be enrolled at 3% and new employees will have immediate eligibility to enter the scheme, as opposed to waiting a year at present. There will also be an additional financial contribution, based on company performance.
In March this year, Global Pensions reported that Fidelity Investments closed its own DB pension plan and moved employees to a similar 401(k) scheme.
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