In a press release , WH Smith said, after a detailed review of its WHSmith Pension Trust, the 11% of members still under the Final Salary Section of the scheme will now be covered under a money purchase pension arrangement, with retirement benefits dependent on company contributions, investment earnings, and the cost of buying a pension upon retirement.
The firm said its reasoning behind freezing the DB scheme falls along the same lines as other companies that have been turning away from their defined benefit schemes in favor of defined contribution schemes. “The long term costs of running a final salary pension scheme continue to be high and difficult to predict, mainly due to low investment returns and members living much longer,” the company said in its announcement. “These factors have prompted many companies to review their pension arrangements and WHSmith is no different in this respect.”
The money purchase pension arrangement already covers the rest of the firm’s workforce. WH Smith closed its DB scheme to new members in 1995. The current move will affect Final Salary Section employees, managers and directors at all levels of the company, the announcement said.
align=”left”>WH Smith has already paid £282 million over the past four years to reduce its pension deficit and has earmarked another £10 million a year for the next five years. The company said it “has an obligation to its current and future pensioners to ensure the health of the scheme does not deteriorate again.”
According to the news release, the change will have no affect on the pensions of the 10,900 deferred pensioners who have left the company or the 5,100 former employees or spouses who currently draw pensions from the DB scheme.