The UK-based pest control and environmental services firm Rentokil Initial has become the first FTSE100 company to close its final salary pension scheme to current employees. The news comes as a further jolt to the already fragile UK pension system.
The move means that current Rentokil staff will have their retirement provision frozen at the current level, irrespective of the length of time that they have worked for the group.
The company aims to plug a massive hole in its pension scheme and hopes to save millions in future pension commitments. In relative terms, we have one of the largest deficits in the FTSE 100. Although we have the financial capacity to deal with the deficit now, we had to make sure that another deficit does not arise in the future, CFO Andrew MacFarlane said to the Financial Times newspaper.
Numerous blue chip companies have closed their final salary schemes to new starters over recent years, and many smaller firms have also been forced to shut them down to existing members also. Yet this is seemingly the first time a group the size of Rentokil has taken such a radical step. The company has been attacked by pensioners’ groups worried that its actions further undermine retirement provision in the UK.
A final salary scheme offers members a guaranteed proportion of their salary for the rest of their lives upon retirement, however rising life expectancy means that such pledges are increasingly difficult for businesses to fund.