Alliance Boots to scrap final salary pension scheme
Alliance Boots has entered intoconsultation with
workers over plans to end its final salary pension scheme to
existing members.
The British pharmaceutical wholesaler has plans to introduce a
new defined contribution scheme in its place.
Alliance Boots said the changes would enable them to offer more
sustainable competitive pension benefits to workers.
Commenting on the topic, Company's executive chairman Stefano
Pessina said, "We are not doing this to save
money. We hope many more people now will adhere to our new
defined-contribution scheme."
Alliance Boots schemes have a net retirement surplus of ?188
million at March 2009, but the company said it wanted to eliminate
instability from its balance sheet.
The move will affect around 15,000 workers who have a final
salary agreement with the company.
Defined contribution scheme is normally seen less generous for
the workers than final salary scheme, but at the same time it
proves less risky for the companies.
Standard
Life and the Daily Mail compare potential pensions for a graduate
contributing to a pension from the age of 22 until retirement at
65. Here they used a starting salary of £20,000 rising to £50,000.
Their calculations assume 3.5 per cent annual investment growth and
zero inflation, so you can see the results in today's terms.
PRIVATE SECTOR FINAL SALARY
Employer
and, possibly, employee contribute. Most guarantee to pay 1/60 of
final salary for each year worked. Some employees have cut this to
1/80 or 1/100 of final salary. Part can be converted to tax-free
lump sum.
WHAT YOU'D
GET: £179,166 tax-free plus £23,888 a year
PUBLIC SECTOR FINAL SALARY
Rules vary.
There are four times as many members of open public sector schemes
as private sector. Employee may contribute but, in many cases, no
fund is built up. Instead, taxpayer foots bill. Most pay 1/80 of
final salary for each year worked, plus a tax-free lump sum.
WHAT YOU'D
GET: £154,531 tax-free plus £20,716 a year
AVERAGE SALARY
Employer, and, possibly, employee contribute. Most
guarantee to pay 1/60 of average lifetime salary for each year
worked. Part can be converted to a tax-free lump sum.
WHAT YOU'D
GET: £134,167 tax-free plus £17,888 a year
EMPLOYER DEFINED CONTRIBUTION
Employer and
employee contribute. Money invested, usually in stock market. At
retirement, pension pot is used to buy an annuity which pays
income. Average combined employer and employee contribution is 11
per cent of salary.
WHAT YOU'D
GET: £89,610 tax-free plus £10,612 a year
PERSONAL DEFINED CONTRIBUTION
Those
without employer pensions contribute to a personal pension (we've
assumed they've put in 10 per cent of their income). The money is
usually invested in stock market. At retirement, pension pot which
has been built up is used to buy an annuity which will pay them an
income for the rest of their life.
WHAT YOU'D
GET: £81,464 tax-free plus £9,655 a year.