Employee Benefits Live: Dairy Crest successfully closed final salary scheme to future accrual

Dairy Crest closed its defined benefit (DB) scheme to future accrual, a move which saved the firm £700 million in future liabilities.

Addressing delegates attending Employee Benefits Live 2011, which kicked off 27 September at the Business Design Centre in Islington, Rob Tansey, group HR director at Dairy Crest, spoke of how the firm avoided disputes with unions when it made the change in 2010. This was despite earlier strikes that broke out in 2006 when the pension scheme was closed to new joiners.

Tansey said that thorough consultation with stakeholders was one of the ways in which further industrial action was avoided. A consultative forum made up of nominated Dairy Crest representatives and union representatives was set up.

The forum considered a number of alternatives to the DB closure to future accrual, including a career average scheme, hybrid DB and defined contribution (DC) scheme, and increases to member contributions. However, the forum decided that closure to future accrual was the best option.

Tansey said: “We were honest. We accepted that it was not a good thing to do but we tried to explain that if we didn’t do it the consequences could be worse.

“You have got to get the timing right, make sure you consult and don’t impose your ideas. Employers have to make sure it is a compelling proposition, communicate [with employees] too much, and don’t be afraid to celebrate success.”

In addition, Dairy Crest offered its pension scheme members a number of other sweeteners including: the ability to take their pension early but remain in employment; life cover for members who do not join the replacement stakeholder scheme, as well as retirement training ten years in advance of an employee’s retirement.

Prior to closing the scheme to future accrual, Dairy Crest entered into a buy-in arrangement, covering liabilities amounting to £300 million with Legal and General.

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