Marks abandons generous pensions

HIGH STREET stores group Marks & Spencer has become the latest big firm to axe its final-salary pension scheme. The retailing giant is abandoning a generous programme for all new employees as part of a wide-ranging financial review.

The scheme is believed to be £29m in the red due to falling stock markets and will have to be topped up by the company. M&S is following in the footsteps of Whitbread, Lloyds TSB, Sainsbury's and British Telecom. Pest controller Rentokil is also reviewing its pension arrangements and will be seeking board approval for a proposed shake-up this week.

All are switching to less costly money purchase or stakeholder schemes because staff are retiring earlier and living longer. Final-salary schemes have traditionally guaranteed a retirement income of up to two thirds of salary.

M&S has not yet decided what it will use instead, as its review will not be completed until January. 'The review was aimed at bench-marking our pension scheme against our competitors to ensure that we are maintaining a competitive position, attracting and retaining the right staff,' said a spokesman. 'We have not decided on the date the new scheme will come in or on the level of our contribution. That will be made clear next year.' Those already signed up to the traditional final-salary plan are unaffected.

Final-salary pensions are a long-term liability because the employer guarantees the level of pension and must usually make up shortfalls in the pension fund. But with a stock market pension it is the employee rather than the company who takes the risk. Most employers cut costs further by contributing much less to stock market-based pensions.