According to Reuters, the Royal Bank of Scotland will close its pension plan for new staff from October, but plans to give existing workers the option of a salary increase for no longer being eligible for the plan. New hires after October would be given a salary increase of 15%.
RBS’s current employees can remain in the pension scheme or receive 15% of their salary to invest in other savings plans, Reuters reported. The RBS announcement follows a new tax regime beginning in April that gives citizens more flexibility in how much they can save tax-free for retirement.
The bank is the most recent large UK company to decide to stop contributions to DB plans, according to Reuters.
In February, department store giant Harrods decided to freeze its DB plan (See Harrods joins UK DB to DC Trend ).
The trend in the UK follows a similar one that has been taking hold in the US, according to a National Association of Pension Funds poll in November that found of more than half of the 400 firms polled no longer allowed new employees to join DB plans (See UK Pensions Follow US Trend ). A more recent survey in February found that of the 50% of respondents to the survey still operating DB plans, 47% have closed them to new employees, and45% of organizations surveyed offer defined contribution (DC) pension schemes(See Survey Documents Changes in UK Pension Offerings ).