UK - Scottish & Newcastle's £1.5bn final salary pension scheme looks set to close to new members under plans being drawn up by the brewing giant's management.
The company – best known for its John Smiths and Newcastle Brown Ale brands – revealed in its July annual report that it has a net pension liability of £187.6m under FRS17.
The scheme is heavily invested in equities which have been punished by falling markets.
Scottish & Newcastle head of pensions and executive remuneration Ray Martin confirmed that the firm has been reviewing its final salary scheme and said the principal reasons behind the move were FRS17 and the desire to control pension scheme risk.
Martin said: “Running a pension scheme, as recent events have shown, is a risky business. We want to provide good retirement benefits, but we have to balance that against the risk and volatility to the company.”
He added that the firm was considering a range of replacements, including a career average scheme, a DC scheme and the more “extreme” option of putting new employees into a stakeholder scheme.
Whichever option is chosen, the new scheme will be contracted back into the second state pension.
Martin said: “We could keep the existing scheme and improve it, but that’s unlikely. Or we could go with the extreme option [stakeholder]. We’re considering the options between those two.”
The scheme allocates 80% (or £1.21bn) to equities.
Scottish & Newcastle’s corporate bond portfolio is worth £32.5m, equivalent to 2.7% of the scheme, the £258m gilts portfolio is worth 21.3% of the scheme’s assets, while the rest is held in other asset classes.
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