All members will be transferred to less generous scheme as engineer tackles fund's £11.3m deficit
International engineer Keller Group is closing its final salary pension in the UK and transferring members to a less generous defined contribution scheme in an attempt to get a grip on the £11.3m deficit in its fund.
Justin Atkinson, Keller's chief executive, wrote to the 170 members of the scheme last week to inform them that they would not be able to save for retirement through the fund after the end of March.
Jackie Holman, the group company secretary, said: "This means that all of the pension benefits accrued to 31 March 2006 will be secured."
She added that the company could no longer afford to provide a final salary scheme. She said: "The costs going forwards are significantly higher than they've been historically."
Employees in final salary schemes are guaranteed a proportion of their wage on retirement for life, leaving employers to shoulder the risks of increasing longevity and volatile investment markets.
Last week, a rise in the price of government bonds took £35bn off FTSE 100 companies' pension funds and taking the total deficit to £110bn. The introduction of more stringent accounting standards last year has also meant that pension debts are more visible on companies' balance sheets.
All benefits accrued to 31 March will be secured
Jackie Holman, Keller Group
In December last year, there was outrage when Rentokil Initial, Arcadia and the Co-operative Group either closed their final salary schemes or watered down their obligations to employees.
Like many contractors, Keller has already closed its final salary scheme to new entrants and has since raised employee and employer contributions. Now it has joined Montpellier, ROK and Alfred McAlpine in closing the scheme completely to stem its liabilities.
Employees transferred to the defined contribution scheme on 1 April will be offered enhanced employer contributions for five years up to a maximum of 9%.
Keller will also be making a one-off payment of £4m into the fund in April and doubling its annual payments to £1.1m. It aims to pay the deficit off completely over eight years.
Keller's turnover in the first half of last year was £335m, with a pre-tax profit of £15.6m.
Dealing with the deficit
Keller’s final salary scheme closed to new entrants
Contributions for members increased from 6% to 8%
Employer contributions increased from 12% to 13%
31 March 2006
Scheme to close completely and members to move to defined contribution scheme with enhanced employer contributions for three years.