Severn Trent has established a new Defined Contribution (DC) scheme which will replace the current DC and Defined Benefit (DB) plans by 2015.
The utilities company announced last year that it was consulting on the closure of its 6,000-member DB scheme to future accrual, prompting protests and a strike ballot among members (PP Online, 21 July 2011).
But following changes to the proposal, including postponing the closure by three years and maintaining key benefits for workers seeking early retirement until 2020, Unison has now backed the plan.
The company revealed in its annual results, published today, that the latest DC scheme was set up on 1 April with all new joiners after this date being auto-enrolled into it.
The defined benefit schemes will close to future accrual on 31 March 2015 and members will join the DC scheme, while members of the existing DC scheme will also transfer on the same date.
The firm said it will automatically enrol those employees who are not currently members of a Severn Trent scheme from April 2013.Unison
Severn Trent branch secretary Mike Dinneen said: “Although it is not good to see the final salary scheme close we did some comparisons of the new scheme against those offered by other FTSE100 companies and it compared very well.
“It was a collaborative process in the end but we really had to fight for it, and it took us to the edge of the first industrial action in Severn Trent since 1981.”
The firm said the closure resulted in an exceptional an exceptional credit of £23.1m to the company balance sheet.
The deficit in the two defined benefit schemes grew from £292.1m on an IAS19 basis to £345.8m over the year to the end of march and the schemes are now 81.8% funded.
After agreeing the latest triennial evaluation, the firm said it had agreed to maintain deficit reduction payments of £10m a year and contribute a further £8m annually through an asset-backed funding arrangement.