Energy firm EDF has gone against the current climate of shutting down final salary pension schemes and insists the strategy is paying dividends for the company.
The firm opened the new scheme two years ago, which has now attracted almost 6,000 entrants at the cost of millions of pounds a year to the business.
Across the UK, final salary, or defined benefit schemes, are closing in their droves. Figures show that four out of five final salary schemes have shut to new members over the past 10 years. About 80% of these have closed since 2000.
But, Ian Baines, EDF’s pensions manager, said the scheme’s annual bill – £11.5m in 2005 – was outweighed by the importance of retaining employees. “We need to keep our staff for the long term. The future of energy is a long-term project – it will take 10 to 20 years [to build new power plants],” he said.
Baines said he could understand how attractive shutting down defined benefit schemes could be to finance directors. “But we couldn’t afford a knee-jerk reaction driven by costs,” he said. “EDF looked away from the numbers and first looked at the solid business reasons for offering the scheme.”
Under the pension scheme, employees put in 4% of their salary and the company 10%. Employee satisfaction surveys showed it was a major reason why staff chose to stay with the company, Baines said.