Abbey scales down pensions

Patrick Hosking12 April 2012

ABBEY National's new chairman Lord Burns has axed the final-salary pension scheme for new recruits a fortnight after taking over at the bank. Abbey, one of Britain's biggest employers with 27,000 full-time equivalent staff, is withdrawing its generous defined benefit scheme for new employees from 4 March.

New recruits will be offered an inferior defined contribution scheme. The new rules will be backdated to 8 October last year for temporary staff.

Abbey is the latest to water down pension benefits. Sainsbury's, Marks & Spencer, BT and Lloyds TSB are among the crowd of companies no longer prepared to underwrite benefits for future staff. Ernst & Young and Iceland have gone further, dumping their final salary schemes even for some existing employees.

Lower prospective share market returns and longer life expectancy have produced ballooning pension liabilities for companies. New accounting rules have also added impetus to the rush to scrap final salary schemes.

Abbey is also putting its pension arrangements under review in a shake-up that could lead to it parting company with its fund manager Merrill Lynch Asset Management.

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