Steel workers have become the first workers in the country to take industrial action over the closure of their final salary pension scheme.

Our members at Caparo face the prospect of much reduced income after years of service

Michael Leahy ISTC

More than 100 members of the Iron and Steel Trades Confederation (ISTC) at the Caparo Merchant Bar factory in Scunthorpe began an overtime ban on Friday at 2pm.

A further 100 ISTC members at the Caparo Natural Gas Tubes plant in Tredegar, South Wales will start an overtime ban next Tuesday.

Workers at the two factories have also voted to strike if necessary.

Michael Leahy, the ISTC's general secretary, said he would urge workers to take industrial action wherever financial salary pension schemes were threatened.

"ISTC members at Caparo face the prospect of much reduced income after years of service," he said.

"It is outrageous that a company claiming to be committed to partnership, transferred ownership of its pension scheme into the hands of trustees before they even met us to discuss our concerns," he added.

A recent survey by the union Amicus showed widespread support for strikes to protect final salary pension schemes.

Cuts in contributions

The steel workers are employed by the Labour peer Lord Paul's company, Caparo Group.

They are angry that their final salary scheme is being replaced with a stakeholder plan for both new and existing members.

While many companies have announced that they will be closing schemes to new customers, few have shut their schemes to existing members as well.

Caparo will also reduce the level of contributions it makes into the new pension plans.

Expensive schemes

An increasing number of companies have closed their final salary pension schemes over the last few years, blaming poorly-performing stock markets, punitive taxation and a new accounting standard.

A recent poll revealed plans by a quarter of small firms to wind up or close schemes within the next year.

In their place, companies are offering riskier schemes, known as "money purchase" plans, which pass on the investment risk to the worker.

Pension worries

Research from the pension consultancy Hewitt, Bacon and Woodrow revealed that many people have yet to wake up to the potential problems ahead.

More than half of people surveyed said they were not concerned about their retirement income.

This represents a dangerous complacency, the firm said.

Of respondents who said they were concerned, more than three quarters said they were prepared to increase their savings or pension contribution.

But only 22% were prepared to contemplate working full time to the age of 70.

The survey also suggested that younger people (aged 16-44) were more willing to raise their pension contributions that those in the 45-55 year age range.

Hewitt, Bacon and Woodrow concluded that workers must rapidly increase their pension payments, or be ready to work beyond the official retirement age, if they are to avoid a major shortfall in their retirement provision.

Michael Pomery, an associate at the firm, said: "Whilst it is encouraging that many people understand that sacrifices will have to be made in order to provide satisfactory retirement incomes, this needs to be translated into action."