UK - Accounting giant Ernst & Young is going ahead with controversial plans to freeze its defined benefit scheme.
The company’s 1300 UK scheme members – 25% of its workforce – have been told to choose between two new defined contribution schemes.
The £410m scheme will be closed to all future accruals at the end of the month.
The DC options are:
- An age-related contribution schedule with benefits linked to employee salaries.
- An adaptation of the firm’s existing DC scheme. It does not have age-related employer contributions into the scheme, but allows members to retain an earnings link with the DB plan.
Ernst & Young spokesman Kevin Russell explained that continuing the DB scheme was too risky.
“About 18 months ago the firm conducted a review of its final salary scheme which made it clear that the long-term financial viability of that scheme was questionable.
“The review looked at options short of closure but it showed that this would only be effective in the short-term. The original rationale goes back to fundamental issues affecting the company relating to risk.”
The firm’s 2002 review disclosed an FRS17 deficit of £151.7m in the scheme, which shut to new members in 1997.
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