Barclays drops final salary pension

Wednesday, 03 June 2009 04:32

Barclays today announced it is proposing to drop its final salary pension scheme.

Unions claim the move will affect 18,000 members of staff.

The final salary scheme was closed to new members of staff in 1997, and existing members will see their future pensions switched to defined contribution schemes.

Existing pots and benefits will be frozen.

Barclays pension scheme covers a total of 247,000 people – including 57,000 current employees, 51,000 pensioners and 139,000 people who have left the firm but are not drawing their pension yet.

A letter to employees from chief executive John Varley states the pension fund now recorded a deficit of £2.2 billion in September last year.

He stated not changing the scheme would “threaten our ability to meet the existing obligations”.

“Put simply, we are proposing to close the final salary schemes and certain other schemes to future accrual,” he wrote.

“What this would mean for existing members of these schemes is that the benefit built up to date (that is, the benefit for all past service) would be locked in. All benefits relating to future service would then be provided by membership of our more modern schemes.”

A Barclays spokesperson the move was in the best interests of employees and shareholders.

“Given the current economic situation, managing costs, including pension costs, is one of our top priorities,” she said.

“It is proposed that benefits relating to future service would be provided for these members by membership of our market-leading hybrid cash balance pension scheme.”

Rob MacGregor, Unite national officer, said: “There will be deep anger amongst the 18,000 staff who have today been notified that Barclays is proposing that the final salary pension scheme is totally closed.

“This attack on the pensions of the loyal and hard-working staff at the bank is utterly alarming. The union is urging the bank not to establish this change.”

He added the union would consult with members to assess the next move.

A Barclays spokesperson said: “We have had dialogue with our partners in Unite in the lead up to the communications with our employees today.

“We now begin a formal process of consultation over the next two months in order to understand the views of Unite and their members on the proposals.”

YesterdayBP announced it was closing its final salary scheme for new employees from April next year.

Firms are increasingly moving to lose final salary schemes as the long-term costs mount and the regulatory burden increases.

Stresses placed on schemes from the falling stock markets creating deficits are also making it easier for firms to justify closing schemes – although little short-term benefit is gained.

Office for National Statistics data for in 2007 show 47 per cent of final salary pension schemes are closed to new members.

“I would imagine that the has fallen dramatically over the last few years and the trend is set to accelerate,” said Marcus Hurd, head of corporate solutions at consultants Aon.

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