Coventry joins rush to close final salary pension schemes
COVENTRY Building Society has become the latest institution to close its final salary-based pension scheme to all staff.
Chief executive David Stewart says the decision is being taken because the scheme represents a ‘significant risk now and in the future’ to the society’s finances.
At present, contributions are made by 400 staff who were employed by the mutual before December 2001 when the scheme was shut to new members.
The fund provides a pension based on a combination of final salary and the number of years worked. But the cost of supporting the scheme is proving too high.
Last year, the society poured £3.8million into the fund and it is expected to contribute a further £3.6million this year, equivalent to 24 per cent of scheme members’ salary.
If the fund were to remain open, the society estimates its contribution would rise to 35 per cent as a result of lower than expected investment returns and scheme members living longer, so drawing a bigger total income.
Once the final salary scheme is shut early next year, employees will pay into a defined contribution pension arrangement, where the final pension will be based on the fund’s investment performance.
The fund will be managed by Legal & General and the society will contribute 15 per cent of salary for those staff moved across from final salary to defined contribution.
Stewart says: ‘We have to ensure the society stays strong for the long term – for our customers but also to protect jobs.’