Pensions update – Scottish & Newcastle staff must contribute

International brewer Scottish & Newcastle (S&N) is making changes to its final salary defined benefit scheme that will require members to pay contributions for the first time.

Following negotiations with its employee council, S&N has decided that members who remain with the scheme will have to contribute 6% of their pensionable pay from 6 April. The company has also ruled out closing the scheme.

S&N claims to have reduced its pensions funding deficit from £400m to £200m after making a £200m cash injection.

Under the Pensions Act 2004 companies must make plans to clear pension deficits. S&N anticipates that payments of £26m a year will be required to clear its deficit over a 10-year period. It costs a further £27m a year to run the scheme.

The 3,600 members of the final salary scheme, which was closed to new starters in 2003, have until 15 March to decide whether they want to make pension contributions or transfer to the company’s defined benefit career-average salary (CAS) scheme.

If those affected all transfer to the CAS scheme, pension costs will be cut by £4m a year. The CAS scheme has been open to new starters since April 2003, with members choosing to contribute between zero and 6% of pensionable pay.

Ray Martin, HR director, rewards, at S&N, said none of the staff affected would be happy about having to pay for something that was previously free, but added that they would prefer to pay contributions rather than see the scheme close. "We said the pension costs and risks were too high and [the employee council] made this proposal rather than having the scheme close," he said.

Workshops, personal pension illustrations and one-to-one sessions with a pensions adviser will be available to employees affected by the changes.