For the last year or so I have been going on about the “Charmed Generation” and how future generations will “never have it so good”. On Monday Rentokil, the business services group, announced that it planned to close its final salary pension to future accrual for existing employees, the first FTSE 100 company to do so.
What does that mean? It means that a central plank of providing a comfortable retirement has just been removed from a lot of employees. Instead of getting a defined amount of money in retirement, Rentokil’s employees will get a pension based on what they have contributed and how well those investments have done. The risk has, in a single leap, gone from employer to employee.
Adrian Waddingham, chairman of the Association of Consulting Actuaries, said he was aware of several other FTSE 100 companies seriously considering shutting their final salary pensions to existing employees.
Robin Ellison, pensions lawyer and chairman of the National Association of Pension Funds, said an NAPF survey to be released in the next few weeks will show “there are a substantial number of companies looking at similar action to Rentokil”.
Dumping these pension commitments is not going to be an easy thing for companies to do since employees are not going to be too happy knowing their planned for retirement may not be so comfortable as expected. Rentokil are lucky that most people don’t understand the difference between pensions that are contributory or define pension and Father Xmas. What I suspect you will hear are arguments like: “if you want to keep your job at all the pensions regime will have to change”. Of course this doesn’t apply to workers employed by the Government – taxpayers pick up the tab for their pensions.
Marketers are you listening. You had better understand how you are going to squeeze every last buck out of the Charmed Generation since they will only be around and spending for the next 10-15 years. The next group will be like Rentokil employees. Happy Xmas. Dick Stroud.
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