Defined-benefit schemes kept for existing members

A pension shake-up at GAB Robins defied expectations by keeping a defined-benefit scheme for existing members.

The company had been widely expected to scrap the scheme entirely and replace it with a simpler defined-contribution scheme.

Defined-benefit schemes are preferred by financial sector union Amicus and other workers' groups.

The loss adjuster tweaked its defined-benefit scheme, preserving the value of members' benefits accrued up to the end of January, and introduced a defined-contribution scheme for new staff and members.

Retirement age under the defined-benefit scheme was put back to 65 from 62, although staff can retire at the earlier age. Benefit calculations become index-linked and reflect a worker's salary over their whole career at the company rather than just on retirement.

Both changes will reduce the value of benefits earned after 31 January. The changes affect 530 members of the GAB Robins scheme.

UK finance director Peter Hardy vowed the company's contribution rate to the new defined-contribution scheme would be "competitive". The rate is yet to be finalised.

He denied the changes would make significant savings, but said the company's contribution rate into the defined-benefit scheme would reduce from its current 13.6% of a worker's salary.

The changes were made to protect the company from volatility in the stock markets, where pension funds are usually invested.

He said: "Making a change now means that in a few decades' time when the bulk of our people come up for retirement there will be no problem."

He denied the changes were motivated by the introduction of controversial pension standard FRS 17, which alters the way fund values are calculated and reported.

"I'm relatively unconcerned about public disclosures," he said. "The single most important thing is the reduction in volatility in the long term."

Hardy said the defined-benefit scheme for existing members would help the company retain staff.