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Last Updated: Friday, 5 October 2007, 15:58 GMT 16:58 UK
Charity to close pension scheme
Citizens Advice bureau
Staff will no longer have a final salary pension scheme
The consumer advice charity Citizens Advice plans to close its final salary pension scheme for both current and future employees.

The closure affects 375 staff in England, Wales and Northern Ireland.

Citizens Advice said the scheme had a deficit of 25m and was now "fundamentally unaffordable".

The trade union Unite said the proposed replacement, a money purchase scheme, would not provide a guaranteed pension for staff when they retire.

"In what is already recognised as a low-pay sector, where recent research shows that average salary is 20% less than its public and private sector counterparts, cutting pensions further takes advantage of dedicated staff," said Rachell Maskel of Unite.

Rising deficit

Citizens Advice said that the scheme's deficit had risen in the past three years from 12.5m to 25m.

Three years ago, it had tried to keep the scheme going by cutting the level of its payouts to members.

But now the deficit had continued to grow, the charity had decided it could not keep it going.

"We are bowing to the inevitable," said Simon Bottery of Citizens Advice.

"We decided three years ago to deal with the deficit by decreasing benefits.

"But the increase in the past three years means it is fundamentally unaffordable," he added.

The charity blamed the increasing deficit mainly on an assumption that its staff would be living for longer after retirement.

Royal Mail

Closures of final salary schemes have become common in the past few years.

Employers have had to contend with the longevity of staff and volatile investment returns, as well as the consequences of their own decisions to take partial or total contribution holidays when their schemes were in surplus in the 1990s.

It is still relatively rare for staff to be evicted from their existing schemes, rather than for the employer simply to close them to new joiners.

However, the Royal Mail has proposed just such a move, which would affect more than 160,000 postmen and women.

Citizens Advice has now started a statutory 60-day consultation with its staff.

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