RAC plc, like most other UK employers, has recently reviewed its final salary pension scheme to assess the impact of the decline in stock markets over the past three years, and the increased cost of providing pension benefits. As a result of this review the Company is taking the following actions:
RAC plc, like most other UK employers, has recently reviewed its final salary pension scheme to assess the impact of the decline in stock markets over the past three years, and the increased cost of providing pension benefits. As a result of this review the Company is taking the following actions:
1. Maintaining its final salary scheme for existing and new employees, and extending the scheme to younger employees, who were previously unable to join due to a minimum entry age of 25.
2. Increasing Company contributions to the scheme to reduce the deficit, which has arisen as a result of falling stock markets. The deficit under FRS17 stood at Ł129 million net of tax at 31 December 2002. The Company will increase its cash contribution by Ł2.5 million in the second half of 2003 and by Ł5 million a year thereafter.
3. The cost of providing pension benefits for the future has increased significantly. This is primarily because people are living longer, typically drawing a pension for twice as long as they did in the 1960s, which requires a proportionate increase in funding. In addition, tax changes & lower anticipated investment returns are also increasing costs. To maintain its final salary scheme, RAC plc will share the increase in costs with employees, who will be offered the choice of reduced future benefit levels or increased employee contribution rates from 1 July 2003.
These actions have been agreed in consultation with Pension Trustees, and, where appropriate, unions, employee groups and legal and actuarial advisers.
Andy Harrison, Chief Executive, RAC plc, said: “As a service business, our people are the key to our continued success. The actions we are taking will secure the future of our pension scheme, which provides a valuable benefit to all our people. The changes also provide the flexibility for people to choose their preferred level of pension benefit.”
Bill Morris, General Secretary, Transport and General Workers Union commented: “We are very pleased that RAC is retaining its final salary scheme. The company has demonstrated its commitment to a long-term solution to a difficult issue.”
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For more information contact:
Anne-Marie Hill, Corporate Communications Manager, RAC plc 01628 843 722
Anita Scott / Stuart Bruseth, Brunswick Group 020 7404 5959
E-mail: racplc@rac.co.uk Website: www.racplc.co.uk