Rolls proposes pensions shake-up

Workers are being asked about suggested pension changes

Aerospace engine maker Rolls-Royce has announced it may close its final salary pension schemes to new members.

The firm has 21,373 active members in three pension schemes, one of which has been closed to new members since 1999.

Now the other two may do likewise, with the company in return putting in a £500m lump sum across the three and increasing its contributions.

The move is an attempt to reduce the combined deficit of the schemes, which stood at £1.28bn on 31 December 2005.

These payments will depend primarily on the members of the schemes accepting closure of the final salary pension schemes to new members Rolls-Royce statement See Rolls-Royce's share price

If the workforce agrees to the move then new employees will instead join a money-purchase pension scheme.

In 2003 it was agreed between management and workforce to reduce the deficit of the main scheme, the Rolls-Royce Pension Fund, by £567m.

Since then there have been discussions regarding the other two UK pension schemes, with the company now making its cash-injection proposals.

"These payments will depend primarily on the members of the schemes accepting closure of the final salary pension schemes to new members and a change of investment strategy to achieve progressively a better match between assets and liabilities," it said.

The group has sites in Derby, Bristol, Glasgow, East Kilbride, Coventry, Lancashire and Sunderland.

There is a total of 119,054 active, current, and deferred members across the three schemes.

Contribution increase

Meanwhile, research from consultancy firm Watson Wyatt has highlighted the pensions burden now falling on the UK's biggest firms.

Watson Wyatt found that the amount of money being contributed into staff pensions by FTSE 100 firms had shot up 30% during the past year.

A handful of companies made what appeared to be large special contributions, the consultancy firm added.

"It now looks as though UK plc would rather accept that pension promises are part of their business commitments and the associated risks are better managed through corporate decision-making than being hidden," Chinu Patel, a senior consultant at Watson Wyatt, said.