Electro joins pensions cop out

ELECTROCOMPONENTS is set to be the latest FTSE 100 company to scrap generous pension arrangements for new recruits. The electrical parts supplier is planning to replace its defined benefit scheme with a defined contribution scheme for new employees in the UK.

Finance director Jeff Hewitt blamed increasing longevity and the prospect of lower investment returns. The new accounting rules were less of a factor, he said. Under the new FRS 17 accounting regime, the UK scheme was in a comfortable surplus of £17.6m. The company employs 2,000 people in Britain and between 60% and 70% are members of the pension scheme.

Abbey National, Sainsbury's and Dixons have recently ditched final-salary schemes for new recruits. Employees in final-salary schemes are guaranteed their pensions regardless of what happens to the stock market. In defined-contribution schemes, the risk passes to the employee.

Electrocomponents today said it was lifting its final dividend 15% to 11p despite falling sales and profits in the year to March. Trading conditions were 'exceptionally tough' but the company has cut net debt by 30% to £53m. Profits before tax and goodwill amortisation fell 15% to £105.5m.

The company said sales were picking up slightly in the US and Asia, flat in Europe and falling in Britain.