UK – Oil company BP’s 19.5 billion euro pension scheme has been ranked the top UK pension scheme in terms of final benefits by consultancy Union Pension Services.
Consult Bryn Davies surveyed 272 UK corporate pension schemes and found that defined benefit schemes provided the best benefits at retirement. Of Davies’ top ten schemes, which he measured against a hypothetical two-thirds final salary scheme, only one was a defined contribution, or money purchase, scheme.
The top ten were: BP, BAT, Parliamentary Contributory Fund, Diageo, NMR, Shell, Portsmouth Water, Granada, Asda and CGNU. The last was the only DC scheme in the top ten.
All of the schemes in the bottom 10 are DC schemes. Davies says the worst is retailer Kingfisher, whose Kingfisher Trust has benefits equivalent to only 25% of the hypothetical ideal.
Other poor schemes are the DC section of Asda’s pension scheme, the Boots Stakeholder scheme and a scheme operated by Johnson & Johnson.
Davies said: "Many employers remain committed to final pay schemes. But if they switch to a money purchase basis most take the opportunity to cut back on the value of their employees' pension benefits.
"As a result, their workers not only face a higher risk from their new scheme, but are also likely to have a much lower income in old age."
BP’s scheme pays 1/45th of a member's final salary for every year they belonged to the scheme with staff contributions at 5%. UPS said the BP plan was 24% better than the two-thirds pension scheme which would pay 1/60th of an employee's salary for every year they were a member.