O2 is planning to close its final salary pension scheme after running up pension deficits estimated to be around £250m.
The proposed closure is part of a draft deal O2 has negotiated with unions, which will also see it launch a defined contributions, opt-in pension scheme next year. Thousands of O2 employees aged 22 or over will be automatically enrolled in the defined contributions pension scheme from March 2013, unless they choose to opt out.
O2 will also compensate final salary scheme members, paying additional company contributions worth 21% of salary until 2016 and 16% thereafter. The operator will also increase its contributions to the company’s money purchase pension plan to a maximum of 11.5% of salary from March 2013.The new pension deal follows prolonged negotiations with the Communications Workers Union (CWU) and Prospect over the past year. Both unions are recommending the draft deal to members who will be balloted later this year after a 60-day consultation period. CWU negotiator Sally Bridge said the deal was ‘an overwhelmingly positive package’.
An O2 spokesman said: ‘We have proposed some changes to our pension arrangements in order to make them fairer for all of our people. We are pleased our proposals have the support of our unions and employee representatives and are now consulting with our people to understand their views.’
Tom McPhail, pensions research head at Hargreaves Lansdown, said: ‘This is a pretty generous offer in terms of contributions. Pension deficits are at record levels due to current gilt yields and the effect of quantitive easing on them. It’s not surprising some large employees are restructuring their pension terms.’
Editor: Carol Millett