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Benefits February 2, 2006
Harrods joins UK DB to DC Trend
February 2, 2006 (PLANSPONSOR.com) - Just as a
continuing stream of US firms are freezing their defined
benefit pension in favor of a defined contribution program, a
similar trend finds UK firms doing the same.
Reported by Fred Schneyer
The latestUK example was London department store Harrods, which has announced plans to freeze its pension to new and existing workers as of April 1, 2006, the BBC reported.
Harrods has said the decision was “not taken easily,” and that a new money purchase scheme will be introduced, according to the news report. Harrods asserted that “the cost and volatility of continuing with the plan presented an unacceptable future risk for its employees and the group.”
Harrods said longer life expectancy, lower interest rates, higher taxes and low investment returns recently had all contributed to increased funding deficits and the cost of providing future defined benefit pensions.
While the company would not discuss the particulars of its new retirement program, t he Transport and General Workers Union said staff had been sent letters saying the company would contribute 4% to the scheme if staff paid in 2% or more of their salary, rising to 8% if they paid in 5% of their wages.
The union, which represents warehouse and distribution staff across the store’sLondon operations, says the higher rate is only around half the maximum 15% Harrods pays into the final salary plan now.
Nissan was the latest example of the DB to DC trend covering its US operations. (See Nissan Follows Trend of DB to DC Switch ).