Vodafone latest company to close final salary pension scheme
Telecoms company Vodafone has announced it is to close its final salary pension scheme to 4,000 current employees.
The mobile phone giant is the latest in a long line of companies to adopt these measures as a result of rising costs amid the recession.
The company recently announced it was looking to increase its £1 billion cost-cutting programme by a further £1 billion by 2012 as a result of a sharp decline in revenues from its core UK market.
The company was once a major player within the UK phone market but is set to lose market share following the merger of rivals Orange and T-Mobile, which will create the UK‘s largest mobile phone network.
Meanwhile, commenting on today’s announcement, a spokesperson for the company said letters have been sent to employees about the plan as part of the legally required consultation process.
“Defined benefit [final salary] schemes have become significantly more expensive to operate with their costs likely to rise in the future,” added the spokesperson.
Commenting on the announcement, Mark Duke, head of pensions at Towers Perrin, told HR magazine: “The action by Vodafone confirms the results of a very recent poll undertaken by Towers Perrin across more than 100 major UK employers. Of this group, 85% were expecting to announce significant pension changes in the next 18 months.”
Earlier this month, sugar firm Tate & Lyle and newspaper publisher Trinity Mirror became the latest firms to close their final-salary pension schemes.
Tate & Lyle blamed the decision on a hike in the scheme’s deficit to £110 million which will see the scheme close to half of its UK workforce next April.
Trinity Mirror, meanwhile, which closed its final salary scheme to new joiners in 2003, said its pension deficit increased by £68.6 million in the first half of the year to £275 million as at the end of June.
In September, Dairy Crest, which is one of the UK’s largest milk firms and makes brands such as Country Life and Clover butter, said it would close its final salary pension scheme to existing members, having closed the scheme to new employees in 2006.
This followed announcements from other blue-chip companies including banking giant Barclays, oil firm BP and supermarket Morrisons, who have all announced plans to close their final salary schemes.
In April, the British subsidiary of the US insurance broker Aon said it planned to reduce its pension contributions to cut its costs – saying it needed to be “protected in challenging conditions”.