Rentokil confirms pension closure

Staff at Rentokil will now pay into a money purchase pension scheme

Rentokil Initial has confirmed it will close its existing final-salary pension scheme to nearly all members next week.

The pest control, cleaning and security business first proposed the closure last December, which made it the biggest UK employer to take this step.

Staff will be offered a money-purchase scheme instead, which Rentokil says will cost it the same amount to fund.

Since November last year the final-salary scheme's deficit has shrunk from £325m to £76m.

Most traditional final-salary pension schemes in the private sector are now closed to new members.

But Rentokil is one of a small number of employers who have decided to close their schemes to existing staff as well, either to save money or to reduce the risk of large deficits emerging in the future.

Among the employers who have done this in the past 12 months have been the Co-op group, Harrods and the Yorkshire and Clydesdale banks.

Falling deficit

The main reason for the shrinking deficit at the Rentokil scheme was an injection of £200m by the company in December.

It was also helped by a rise in the value of the scheme's stock market investments, and more favourable assumptions about future investment returns from bonds.

In order to comply with the legal requirement to fully fund a scheme if it is to be closed, Rentokil previously announced it would make more cash payments over the next six years to eradicate the deficit completely.

To prevent the fund facing a ballooning deficit again, it has now switched its investment strategy largely out of shares and mainly into bonds, and put in place a series of financial hedges to protect it against any untoward changes in interest rates or inflation.

The company employs 70,000 staff around the world but the UK pension scheme now being closed had only about 3,000 active members.

Its 8,000 pensioners and 15,000 former staff, who have yet to retire, will not be affected.