Page last updated at 13:08 GMT, Thursday, 26 November 2009

Vodafone plans to shut its final salary pension scheme

Vodafone shop
Vodafone joins a growing list of firms shutting schemes to current members

Mobile phone company Vodafone plans to close its final salary pension scheme to 4,000 current members.

It is one of the biggest employers to have taken take this step recently, which it says is necessary to rein in the rising cost of the scheme.

Staff have been sent letters about the plan as part of the legally required consultation process.

The final salary scheme was closed to new joiners in 2005, with 6,000 staff now in a defined contribution scheme.

"Defined benefit [final salary] schemes have become significantly more expensive to operate with their costs likely to rise in the future," said a spokesman.

"This change will make our pension provision sustainable in the long term, and affordable for employees and the company."

Wider trend

The employees in Vodafone's final salary plan will join the defined contribution (DC) scheme instead, which the company says will be "substantially improved."

The company is proposing to raise the level of its contributions to the DC scheme from one-and-a-half times the value of an employees contributions to two times.

"The action by Vodafone confirms the results of a very recent poll undertaken by us across over 100 major UK employers," said Mark Duke at pension advisers Towers Perrin.

"Of this group, 85% were expecting to announce significant pension changes in the next 18 months.

"We anticipate that many will take action similar to Vodafone while others will find different ways to mitigate the rising cost of promising a pension to employees," he added.

Vodafone's most recent annual report shows that the scheme had assets worth £755m but a deficit of £60m.

Its closure is planned for next April.

On Wednesday, struggling airline BMI also announced the closure of its final salary pension scheme to about 1,000 staff, alongside 600 potential redundancies.

It closed its scheme to new joiners in 2002.

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