Mineral specialist Imerys is undertaking a consultation to cease accrual in its defined benefit pension scheme, following the completion of a scheme merger earlier this year.
The trustees agreed in principle to the merger last year, as recorded in its annual report for the year ending April 5 2013, signed off by its auditor in December. The merger was completed in January, according to an HR representative at the employer.
This followed the company’s acquisition of china clay producer Goonvean in December 2013, following clearance by the Office of Fair Trading and a ruling from the Competition Commission.
“We’re in consultation to cease accrual,” Jeremy Barnard, HR manager at the employer, told Pensions Expert last week. The 90-day consultation began in July. The scheme is already closed to new members.
Such closures are growing among private sector employers, with 35 per cent closed to both new members and future accrual, compared with 31 per cent last year, according to the National Association of Pension Funds’ annual survey 2013.
Fuat Sami, partner at law firm Sackers, said: “Both scheme mergers and closure of DB are something we’re seeing quite a lot of.”
He added that the large number of schemes already closed to future accrual would likely grow further with the end of contracting out in 2016, as a lot of employers are viewing the increased cost as “the final straw”.
“At the moment [closures are] driven by employers wanting to manage their liabilities,” he said.
Reducing risk
Simon Kew, director of pensions at covenant specialist Jackal Advisory, said DB schemes were looking increasingly unappealing to employers as longevity trends drive up costs.
“There will be an exception, but I can’t think of a single employer that wants to keep a DB pension scheme. Every employer could make a case for closing their DB scheme.”
He added the biggest challenge faced by schemes looking to close was resistance from the membership.
Sami said balancing the interests of the workforce and trustees also presented problems.
“On the one hand the employer will be talking to the trustees trying to satisfy their demands, and at the same time engaging with the workforce,” he said. “You have to keep both sides happy.”
Sami added: “The trustees have to consider the interests of the whole membership, including deferreds and pensioners. The interests are closely aligned, but not totally.”
A number of high-profile employers have ceased accrual in their DB schemes. Last month, Channel 4 resumed a consultation it had paused on the closure of its DB scheme to current members.
Telecoms company EE closed its scheme earlier in the year as part of a restructure aimed at making its pensions provision more affordable.
