Vodafone axes pension scheme

Vodafone UK has confirmed that it will cease to offer employees its final salary-based pension scheme, affecting 4,000 staff.

The pension fund currently has assets of £755 million (€829m) and liabilities of £815 million.
 
In a letter to staff, the carrier cited the higher costs of supporting final salary schemes when compared to defined benefit pensions as the reason for the change. Vodafone employees under the final salary plan will be moved over to the defined contribution scheme instead, which the company says will be substantially cheaper.
 
The carrier’s decision is in line with a number of large corporates whose pension funds have been affected by low interest rates that have inflated liabilities, while rising life expectancy has also increased costs.
 
The final salary scheme was closed to new employees in 2005, with 6,000 staff now in a defined contribution scheme.
 
“Defined benefit [final salary] schemes have become significantly more expensive to operate with their costs likely to rise in the future,” a spokesman told the BBC.
 
The closure is planned for next April.