News update – Xansa to hold on to DB plan

Outsourcing and IT firm Xansa has taken steps to keep its defined benefit (DB) pension scheme open by increasing both employee and employer contributions after reports last November of a worsening in its £92.1m accrued deficit.

Employees’ contributions will increase according to the accrual rate they choose for their individual fund. Those who opt to remain on the previously standard rate of 1/60th of pensionable earnings will be liable for an extra 4.5% of salary per year. Employees who wish to contribute less can select an accrual rate of 1/70th or 1/80th, which equates to a minimum increase of 2% in contributions.

These increases will be phased in gradually over the next two years, enabling employees to build up to paying the full amount.

Contributions to the scheme are managed through the company’s flexible benefits package, which last month was opened for a special renewal period to enable staff to fund additional contributions by selling holiday.

During this time, employees were given the option of selling up to five days holiday to release funds to boost their pension contributions. The option to sell holiday and take its value as cash was also available.

Reducing paid annual leave from 25 to 20 days will account for an additional 2% of pension contributions. Those who did not wish to take up this option will make up the difference out of their salary.

Although staff are able to make additional voluntary contributions outside of the flexible benefits scheme, most elect to manage contributions through flex.

Sandra Marsh, head of HR policy at Xansa, said the changes were crucial to retaining the scheme. "Staff will have to pay more if they want to keep the DB scheme open and that was the deal. They went through a ballot option and the overwhelming vote was to maintain it even if that meant paying additional contributions." She added that although it was not a popular decision, members accepted the proposals after they realised the gravity of the situation. "They weren’t jumping for joy as you might imagine. Our managing director and our global HR director personally ran about 30 briefing sessions. They were received very well by the workforce, because this level of [management] were out there explaining why we’ve got a problem."

Xansa will contribute an additional 4% of each employee’s salary to the scheme and has increased its minimum retirement age from 60 to 65 years.

Its DB scheme was closed to new members in 2002 and has about 1,800 active members. These changes will not affect the firm’s defined contribution (DC) scheme to which it contributes 5% of employees’ annual salary.

The special renewal period closely follows the annual renewal period that took place in January. This year, new benefits included a critical illness policy which was taken up by 275 employees and a short-lived home computing initiative which received just 2% take-up before March’s Budget.