Dunlop To End Final Salary Pension Scheme

Birmingham Post, May 12, 2009

Tyremaker Goodyear Dunlop UK is to begin consultations on a plan to close its final salary pension scheme.

The Birmingham-based Anglo-American company would not say yesterday whether the scheme was in deficit or by how much, but it is believed to be the latest in a growing list of businesses that are finding the cost of supporting a pension scheme based on pay and length of service excessive.

It said yesterday that it was starting talks with pension trustees, trade unions and employee representatives about the introduction of a new defined contribution (DC) pension scheme.

Unlike a final salary, or defined benefit (DB) scheme, in which the company bears the risk of ensuring that the fund has enough cash to meet its liabilities, a DC scheme transfers the investment risk to employees.

Goodyear Dunlop said the proposed new scheme would replace both the company's so-called Hybrid Scheme (which combines a normal final salary scheme with additional voluntary contributions from members) and an existing "New Hire" DC scheme.

The company calculates that about 850 employees in Birmingham and Wolverhampton are members of the hybrid scheme and 70 pay into New Hire.

"The consultation will be on the proposed replacement of the current schemes with a new enhanced defined contribution programme," the company said in a statement. Those who are paying into the DB scheme will have their accrued benefits deferred, and the company is proposing the introduction of a DC scheme for future service to add to the members' existing benefits.