Parent group Montpellier acknowledges employee anger but says decision is the right one for shareholders.
Contractor YJL has closed its final salary pension scheme to most staff, becoming the latest contractor to slash retirement benefits over concerns about pension liabilities.

Parent group Montpellier confirmed the decision on Tuesday at a preliminary results meeting. It revealed that it had a deficit of £7.8m on its final salary scheme, a rise of 65% on last year.

Montpellier group managing director Paul Sellars said the group's scheme had been hit by new accounting requirements, low interest rates and inflation, and falling stock markets.

Sellars defended the decision to close the pension scheme to all staff except those retiring within the next five years, saying it was in the interests of the shareholders.

Sellars said: "It was the right thing to do – we would have regretted it if we hadn't done this as conditions for pensions have worsened since we made the decision.

"We thought long and hard about this – we didn't do it lightly. The employees were naturally very disappointed, some of them angry. I don't blame them - in their situation the pension scheme was one the advantages of working for us."

Sellars added that the pension industry was in trouble. He said: "It's a very unsatisfactory state of affairs that we have got into."

Montpellier's decision coincided with the government's new pension proposals, announced on Tuesday, aimed at encouraging longer working lives. Under the policy, early retirement will be discouraged, and compulsory retirement at 65 scrapped.

The YJL decision follows the closure of final salary schemes by contractors such as Galliford Try and Taylor Woodrow.

Analysts claim that pensions will be a major concern for the sector next year. Leslie Kent, analyst at stockbroker JM Finn, said it could well hit profit forecasts. Kent said: "I expect pensions to be a very, very serious part of profit and loss accounts in 2003."

  • Montpellier posted improved pre-tax profit and turnover for the year to 30 September. Despite a drop in the commercial market, profit was up 37% to £4.9m and turnover rose 44% to £445m.

      The firm doubled its order book to £518m for the period, compared with £227m in 2001, by focusing on public sector work, such London Underground and social housing.

    Sellars said: "We have got some good work. Like any contractor we are aware of conditions, but we haven't seen a collapse in orders."