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August 25, 2009    

RBS planning to cap final-salary pension scheme

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by Kay Murchie

Royal Bank of Scotland (RBS) is proposing to cap increases in its final-salary pension scheme, which has been described as a “body blow“ to its 60,000 staff by the Unite union.

The union said that against the backdrop of the “bumper” pension paid to former chief executive of the bank, Sir Fred Goodwin, the proposals added “insult to injury”.

Sir Fred Goodwin initially took a pension of £703,000 when he left RBS but eventually bowed to public pressure and agreed to reduce his pension income to £342,500 a year.

Commenting on today’s planned changes, the bank said the move was “pragmatic and necessary”.

The bank, which is 70% owned by the taxpayer, closed its final-salary scheme to new members three years ago and like many other businesses has been looking at its provision for existing members.

Banking giant Barclays recently announced it was planning to close its final-salary scheme for existing members.

Neil Roden, head of human resources at RBS said: “Only one third of our staff are members of the UK defined benefit pension scheme, which we closed to new members in 2006.”

“This is an expensive scheme for our shareholders to fund and a generous one in comparison to the market.”

“The reforms we are consulting on seek to strike a balance between reducing the costs and future liabilities of the scheme to the group, with doing what we can to protect the welfare of existing staff and scheme members.”

“It is a pragmatic and necessary course of action and not a decision the board have taken lightly,” Mr Roden added.

In response, Rob MacGregor of Unite said: “It will support its members in any action they choose to take to defend their pensions.”

Unite said its senior representatives at the bank would meet later this week to decide the “most appropriate course of action”.

In related news, actuarial firm Watson Wyatt recently predicted that about half the final-salary pension schemes in the private sector would close to existing members in the next few years.

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