UK – Food producer Northern Foods has closed its final salary pension scheme to new employees but said it will pay £50m (€72m) in the next two years to plug the scheme’s £220m deficit.
“As part of our programme to address the pension deficit, we will make a special contribution to the pension scheme of £50 million over the next fifteen months”, the Hull-based company said in a statement.
Northern, which supplies supermarkets like Sainsbury’s and Tesco, said £20m would be paid in before the end of the current financial year, a further £20m in the 2005/2006 financial year and the final £10m the following financial year.
“The existing scheme has been closed to new entrants and a new scheme will be introduced for new employees,” the statement also said. A spokeswoman for the company said the new pension deal would be based on career-average salary.
The move appears to contract comments the company made as recently as June last year.
In its 2004 financial review, dated June 2, it said: “We believe that a defined benefit pension scheme is an important benefit to our employees and is part of the remuneration package offered to support the recruitment, motivation and retention of high-calibre employees.”
The report said that according to last full valuation of the scheme, carried out as at March 31 2002, the scheme was worth £449.9m.
”Our fund is relatively immature with almost twice the level of contributions going in as pensions paid out, which leaves us able to take a long term view of investment returns”, it also said.
According to International pension Funds and their Advisors 2004, Northern Foods Pension Scheme employs Legal & General Investment Management, Lazard Asset Management, Wellington Management International and AllianceBernstein Institutional Investment Management, but the company declined to comment on the asset management team.
The firm added that no decision about possible asset allocation changes has been made yet.