Rolls-Royce offers to restructure pension funds |
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Thu, 13 Apr 2006 10:45
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LONDON: Aircraft engine maker Rolls-Royce Group Plc. is talking to its staff to close the final salary pension scheme to new entrants. In exchange for agreeing to this, the company is proposing to make a 500-million-pound payment to its U.K. pension schemes, which are facing a deficit of 1.285 billion pounds as of 31 December 2005.
The company said Thursday it will also increase the level of its contributions into the schemes but would insist on a change in the investment strategy of the schemes to get a better asset-liability match.
Rolls-Royce has three pension schemes running for its staff in the U.K. Its main scheme, the Rolls-Royce Pension Fund, was closed to new members in 1999, while the other two schemes -- the Rolls-Royce Group Pension Scheme and the Vickers Group Pension Scheme -- are open to staff. The payment of 500 million pounds will be across the three schemes.
The three schemes have a total membership of 119,054 -- 21,373 active members, 60,493 current pensioners and 37,188 deferred members.
A statement by the company insisted that the payment will depend primarily on the members of the schemes accepting closure of the final salary pension schemes to new members and a change in the investment strategy.
Several British companies are restructuring their pension schemes in order to reduce the increasing deficits occurring as a result of increased life expectancy and poor returns on investments in recent years. Many companies have only defined contribution schemes to new employees, which do not require the company to specify how much will be paid out to pensioners.
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