Now IBM looks at cutting final salary pension scheme

Wednesday, 08 July 2009 10:07

IBM has become the latest firm to look at cutting its final salary pension scheme for existing staff in the UK.

The technology giant has already stopped new members of staff from joining the defined benefit scheme, and it is consulting on closing it to existing members.

The changes could hit a quarter of IBM’s 20,000 UK workers.

Final salary pension schemes are increasingly become a thing of the past as companies look to reduce long term costs of providing for staff as people live longer.

Instead they are opting for defined contribution schemes – where pension income is based on how much is contributed and not a final salary.

Last month both BP and Barclays shook up their final salary pension schemes, and further firms are expected to follow suit.

Five years ago 40 per cent of companies offered final salary schemes, now just four FTSE 100 firms – Shell, Tesco, Cadbury and Diageo – offer workers such pensions.

A poll of 157 UK firms – including 33 FTSE 100 companies – by PricewaterhouseCoopers (PwC) last month found 72 per cent were considering closing final salary pension schemes to existing employees.

Some 96 per cent of companies said final salary pension schemes were unsustainable.

An IBM statement read: “Taking action to maintain competitiveness in the marketplace and introduce greater predictability to long-term pension provision costs, IBM UK has communicated to UK employees initiation of a consultation process regarding a package of pensions-related proposals.

“These proposals include enhancements to the defined contribution plan for all IBM UK employees, and closure of the defined benefit plans for existing defined benefit members.”

Comments Bubble Comments

blog comments powered by Disqus

Twitter: My Finances

Join the conversation at #news_myfinances

Newsletter sign up


In addition to the weekly newsletter, which areas of finance would you like to hear from us about:

Tick this box if you would like us to send you promotions from carefully selected third parties.

By signing-up you agree to the terms of use and privacy policy.

sign-up button

Get the latest information on: