RAC to rescue of final-salary pension

ROADSIDE rescue and motoring services group RAC has wiped out two-thirds of its £129m pension deficit after staff were asked to stump up higher contributions.

The company, formerly known as Lex, announced the measures in February in an effort to retain its final-salary scheme at a time when dozens of other employers were closing theirs.

It asked the 6500 pension scheme members to pay an extra 4% of their salary or accept reduced retirement benefits. At the same time, it said it was boosting its cash contribution by £5m a year. Chief executive Andy Harrison said staff had accepted action was needed to preserve their guaranteed pensions and about 45% of members had agreed to increase their contributions. He added that if the FTSE 100 rose to 4800, the pension fund deficit would be eliminated.

The move comes amid growing realisation among companies that they must plug their pension holes or face problems recruiting and retaining staff.

RAC revealed a strong set of first-half results with headline interim pre-tax profits up 30% to £43.1 million on sales 6% higher at £787m.

A one-off loss on the sale of the bulk of its struggling mechanical handling business pushed the bottom-line figure down to £15.4m, against £20m last year. The interim dividend is up 5.4% to 9.7p.