Pension worries: An increasing British concern

Facing a �350m shortfall in its employee pension scheme, Whitbread management has decided to contribute an extra �15m in each of the next three years.

The firm says that its decision is good for both shareholders and workers.

The decision by Whitbread to boost its annual top-up payment to �27m is against a backdrop of successive firms cutting employee pension benefits.

Pension woe

Final salary schemes have traditionally been seen as the best type of pension a worker can get.

By taking these prudent steps now we are protecting our shareholders' interests Sir John Banham Whitbread chairman

They guarantee a retirement income based on a percentage of your salary every year for the rest of your life.

The stock market falls of recent years have meant that the total assets held by many company schemes have shrunk.

If assets fall below liabilities, employers are duty bound to prop up ailing final salary schemes in order to ensure members are paid their benefits in full.

According to report by the Association of Consulting Actuaries (ACA), almost three-quarters of schemes are now closed to new entrants.

Some firms have taken the drastic step of winding-up final salary schemes - under current wind-up rules workers who have retired have their pension guaranteed but those still at work do not enjoy protected rights.

As a result, some workers after a lifetime's contributions can be left with very little, through no fault of their own.

Scheme closed

Whitbread took the decision to close its final salary scheme to new members back in January 2002 - workers that joined after that date have been given the option to join a money purchase pension scheme, where they shoulder investment risk.

Commenting on the decision to boost the coffers of its final salary pension scheme Whitbread chairman Sir John Banham said:

"By taking these prudent steps now we are protecting our shareholders' interests by avoiding the immediate need for a major capital payment into the fund.

"We have also safeguarded the interests of fund members who are essential to the future success of the company."