The Bank of England has become the latest organisation to axe its final salary pension scheme.
The move, designed to plug its £300 million deficit, has sparked concerns amongst other public sector outfits that they are next in the queue.
The story reported in The Times is attributed to a leaked internal memo which is said to relate to plans to scrap the final salary pension scheme for new entrants. Joiners will instead be offered a pension based on an average salary scheme. It also wants to increase the retirement age from 60 to 65 and remove a perk that allows employees to retire early and claim their pension without penalty.
Pension experts said that the move was significant because the Bank’s scheme is widely seen as a gold standard in the public sector, reports the paper.
Brian Gallagher of Amicus, the largest manufacturing union in the UK, said his members would contest the plan and feared that the Bank’s decision could set a precedent. “If the Bank of England succeeds with this deal, it might encourage other managers in the public sector, such as those running the local authority pension schemes, to try to have another go at ending final-salary schemes, but we will fight against this every step of the way.”
According to the report, the Pensions Policy Institute estimates that in 2003-04 the net cost of all public sector pensions was about £18billion a year – the equivalent of 1.6 per cent of GDP.