Royal Bank of Scotland (RBS) and Sainsbury’s have been criticised for making changes to their occupational pension schemes, which experts believe could leave many staff out of pocket in the long-run.
Under plans to close its final salary scheme to new staff, RBS is offering new starters a 15% salary ‘uplift’ by way of compensation. Current employees will be able to remain in the scheme or receive a lump sum of 15% of their salary ‘to invest in other savings programmes’.
RBS said that the move would give staff “increased choice and flexibility” for their pension, and claimed that it would cost the firm roughly the same as the current scheme.
But the Amicus union expressed concern that some staff may take the 15% as cash – even though it would mean paying more tax – and not bother with a pension.
Amicus national officer Rob MacGregor said: “Look beyond the spin and this is a money-saving measure. It’s very disappointing, given that the bank is making 8bn a year profit.”
Meanwhile, Sainsbury’s faced criticism from a pensions consultant for the way it is changing its career-average pension scheme.
Members of the scheme are being asked to increase contributions from 4.25% to 7%. Those that do not choose this option will be automatically switched to a ‘cash-balance’ pension. Under this option, employees aged 60 or over could lose two-thirds of their benefits, while 45-year-olds could lose three-quarters of their pension, according to pensions consultant John Ralfe.
This pension scheme would cost Sainsbury’s about half as much as the career-average plan, he said.
It follows a similar move in 2004, when Sainsbury’s introduced the career-average scheme. About one-third of staff then on the final salary scheme did not respond and were automatically switched, Ralfe said.
A spokeswoman for Sainsbury’s said it would not be transferring workers’ previous pension benefits into the cash-balance section, and that changes only affected newcomers.
“We are doing everything we can to communicate that we want them to make a positive choice,” she said.
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