Invensys may scrap pension scheme

By MALCOLM WITHERS
Updated:

 

ENGINEERING group Invensys is considering winding up the final-salary pension scheme for the 5,000 members of its British-based workforce. Faced with an estimated £600m hole in its pension fund, Invensys is under pressure to end or modify the scheme, say City analysts who believe closing the fund is the most likely outcome.

Derek Simpson, general secretary of engineering union Amicus, today pledged support for his thousands of members at Invensys who have promised industrial action at the troubled group if there are any changes to the pension scheme.

The last time Invensys revealed details of its pension fund, in 2002, it said that 50% of its investments were in equities, 45% in bonds and 5% in other investments.

At March 2002, the total value of its assets was £4.78bn. The scheme liabilities amounted to £4.65m. By September, the group admitted that the scheme's liabilities had increased to £150m. Broker Merrill Lynch has estimated these are now running at between £350m and £400m, equivalent to 11p a share.

With the shares languishing near an all-time low of 12 3/4p, the pension fund deficit is swallowing a lot of shareholder value. Next year, Invensys may face a £40m increase in contributions.

The three-yearly revaluation of the fund is due this September. City insiders say that chief executive Rick Haythornthwaite, in the midst of his restructuring plan, will be considering the pension fund's future. But he will run into opposition from the workforce if there are changes. Invensys is trying to complete a disposals programme to add to the £1.8bn of sales achieved so far.

Engineering union chief Simpson said it is incumbent on the Government and companies to protect those in pension schemes. 'Why should employees pay for board mistakes, especially when they are due to the shortsightedness of the company in the first place?' Invensys is now in danger of being expelled from the blue-chip FTSE 100 index.

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