RM looking to close its defined benefit pension

[RobertT]

http://www.ft.com/cms/s/0/23992fb8-a259 ... z3uMNhSTAU" onclick="window.open(this.href);return false;

Retreat from ‘gold plated’ final pay pensions gathers pace

The retreat by FTSE 100 companies from “gold plated” staff pensions has gathered pace, as the burden from pension deficits continues to weigh on the largest employers.
Analysis of the corporate accounts of FTSE 100 employers shows that the cost of defined benefit pension provision, as charged to company profits, decreased by 13 per cent to £7.2bn in the year to end of June.

This figure, which allowed for the impact of changes in assumptions and market conditions, compared with a fall of 10 per cent the year before, according to the analysis by JLT Employee Benefits, a consultancy.
Only 23 FTSE 100 companies still provide defined benefit schemes, which typically pay a pension that is a proportion of final salary, “to a significant number of employees”, said the analysis.

While that number had remained static over the past year, it was expected to fall as many large employers recently signalled a DB pensions retreat.
Only 58 FTSE 100 companies are still providing “more than a handful of current employees” with DB benefits, compared with 55 last year and 66 in 2013.
“We are seeing increasing evidence of the closing down of the UK’s private sector DB pension schemes,” said Charles Cowling, director at JLT Employee Benefits.

“Even among FTSE 100 companies, fewer and fewer are providing DB benefits to employees.
“Tesco, United Utilities and the Royal Mail are just a few more major employers recently looking to close the doors of their DB schemes to all employees for future benefit accrual.”

Unlike workplace pensions more widely offered today, DB pensions promise inflation-proofed income to the plan member in retirement, typically based on a proportion of their final salary, for as long as they, their spouse or dependants live.

But the cost of these promises has spiralled, largely because of increasing longevity and low gilt yields, which have the effect of increasing liabilities.
“There are a significant number of FTSE 100 companies of which the pension scheme represents a material risk to the business,” said JLT.
“Five FTSE 100 companies have total disclosed pension liabilities greater than their equity market value.

“International Airlines Group, BAE Systems and RSA total disclosed pension liabilities are almost double their equity market value.”
The total deficit of FTSE 100 pension schemes increased by £19bn to £78bn over the year to the end of June, with the cost of pension promises, or liabilities, rising to £614bn from £577bn, according to JLT.

A total of 16 companies disclosed pension liabilities of more than £10bn, the largest of which is Royal Dutch Shell with disclosed liabilities of £62bn.
According to the survey, BT, the telecommunications group, made the biggest deficit contribution of any FTSE 100 company over the past year, with a payment of £800m (net of ongoing costs).

The Pensions Institute, a UK research body, has warned that about 1,000 private-sector pension schemes, including 25 of the largest in the UK, were “highly unlikely” to pay their members’ pensions in full.

[baldrick]

Often what happens is that an employer first closes it's pension scheme to new employees, then it closes it for existing employees.

[RobertT]

Often what happens is that an employer first closes it's pension scheme to new employees, then it closes it for existing employees.

Exactly! RM closed it's defined benefit scheme(RMPP) to new employees in 2008, since then they've only had access to the defined contribution plan(RMDCP).

I know this is only a press report and it's nothing definite, but it must be being considered as an option. There's no legislation preventing it, other than they must provide a pension scheme and pay a certain percentage into it. And I'm sure the privatised Royal Mail could save huge amounts of money by doing it.

Unfortunately it would mean a lesser pension for the average postie.

[tpost]

I did hear off a union rep that in 2018 the pension plan is being reviewed and will be closed as its too costly.

[fly-catchers]

If that happens does it mean you would end up with 3 pensions? Final Salary to 2008,them the Career average DB one and them a DC one? And would the figures shown on the recent statements be null & void?

[RobertT]

I did hear off a union rep that in 2018 the pension plan is being reviewed and will be closed as its too costly.

Yes, there is due to be a review in 2018 which could see the closure of the RMPP in its current form. Although there are a few conditions which could mean an earlier closure. It could also continue after 2018.

Realistically it will close sooner or later, it’s just a matter of when.

[RobertT]

If that happens does it mean you would end up with 3 pensions? Final Salary to 2008,them the Career average DB one and them a DC one?

Yes.

And would the figures shown on the recent statements be null & void?

The NRA60 element of your pension(up to April 2010) is already ring fenced and goes up with inflation. That will continue to be the case.

The NRA65 part, which is just an estimate of what you might get based on your potential service from April 2010 to your 65th birthday. That will be ring fenced from the date of any closure and will increase with inflation each year afterwards.

The benefits from a DC pension are likely to be far less than you would have got if the current scheme stays open.

Things always change and unfortunately pensions are no exception. So the most important figures on your statement are always relating to what you’ve already accrued, not what you might build up in the future.

[genesis]

Reading this ,link http://www.ipe.com/countries/uk/casss-p ... 94.article" onclick="window.open(this.href);return false;
mentions changing from Protecting members pensions to protecting members interests.

[jetblack]

Where's our union on this ?