Members of O2’s final salary pension scheme have voted to increase their contributions to prevent it from closing.
A ballot of employees belonging to the Communication Workers Union (CWU) saw 94% backing proposals which would enable them to retain their final salary pension scheme.
A 60-day consultation exercise will now begin, allowing more than 2,000 employees affected by the changes, to choose between different options, depending on when they joined the scheme.
For example, employees that joined the scheme between April 1986 and April 2001, can opt to increase their contributions from 6% to 10% without any other charges. Alternatively, they can opt to increase contributions from 6% to 7.5% but benefits for future service are reduced as the accrual rates changes from 60ths to 80ths.
If members leave to DB scheme, they will be paid 21% of salary after five years and 10% of salary thereafter. This can be paid in part or full into the firm’s defined contribution pension plan or taken as cash.
Meanwhile, members that joined the final salary scheme before 1986 can choose to increase their contributions from 6% to 10% and face no other charges. Or they can opt to increase contributions from 6% to 7.5% but see benefits for future service reduced. This will mean the existing arrangement of 1/80th and 3/80th automatic cash per year of service is reduced to 1/80th with no automatic cash.
If they leave the DB scheme, this section of members will be paid 21% of salary for five years and 10% of salary thereafter. This can be paid in part, or in full into the firm’s DC scheme or taken as a cash lump sum.
Andrew Kerr, deputy general secretary at CWC, said: “This is a fantastic result which strongly endorses the work of the CWU’s negotiating team. as part of the deal members can receive independent financial advice and then get on with choosing which pension option suits them best, with the option of retaining their full final salary pension.”
For more articles on managing final salary pension schemes