BP will close its final salary pension scheme to new employees from April 2010 as part of a long-term cost savings plan.
The FTSE 100 firm is the latest in a long line of high-profile employers to slash defined benefit (DB) pension benefits. It will instead offer a defined contribution (DC) scheme for new joiners, and will continue to contribute 15% of employees' salary, with a minimum of 5% going into the fund. Staff will be able to take any difference as cash.
When last valued in 2007 the DB scheme was 134% in surplus and the 2008 figures also set to show a healthy position. A spokesman said the closure did not represent a knee-jerk reaction to the economic downturn, but a move to protect shareholder interest in the long-term.
"This is not about short-term cost savings. We are looking to [mitigate] future pension liabilities for a decade and beyond," he said.
Current employees will continue to accrue final salary benefits and will not be affected.
Meanwhile, BP said it was trying to put together a more flexible package for staff, and plans to launch a flexible benefits scheme. It is currently in consultation with staff and suppliers to finalise the details of scheme, but did confirm that free private health insurance would be offered to all staff.