Dixons shuts final-salary scheme

By PATRICK HOSKING
Updated:

 

DIXONS chairman Sir Stanley Kalms has launched a bitter attack on new accounting rules after the electrical stores giant became the latest blue-chip company to close its generous pension scheme to new recruits.

Sir Stanley, 70, who set up the pension scheme himself in the 1950s when Dixons was a tiny business, said the decision was 'extremely disappointing and sad'.

He blamed the new accounting rule FRS 17, which forces companies to disclose pension fund deficits on their balance sheets. 'It's a stab in the heart of final-salary schemes,' he said. 'It's having a devastating effect on pensions. The whole pensions movement is under massive pressure.'

Final-salary schemes had been 'a cornerstone of recruitment', said Sir Stanley, a veteran entrepreneur and one of the most respected chairmen of a FTSE 100 company.

Dixons employees hired after 1 March are being offered a so-called 'money purchase' pension, rather than the more generous final-salary scheme enjoyed by their longerstanding colleagues.

Final-salary schemes guarantee that employees will receive a pension linked to their final salary, regardless of what the stock market does. With money purchase schemes all the risk is with the employee.

'No one ever costs legislation, they just introduce it,' said Sir Stanley of the new accounting rule. The old system allowed companies to smooth out the ups and downs of the stock market, he said.

The new system affects all recruits in Dixons, Currys, PC World and The Link mobile phone shops. Dixons Group employs around 28,000 people in Britain and between 30% and 40% of them belong to its final-salary scheme.

The Dixons decision follows similar moves by major employers including Marks & Spencer, Abbey National, Sainsbury, ICI, Barclays and Lloyds TSB. Some companies - including Ernst & Young and Iceland - have closed their final-salary schemes for existing staff too.

The TUC said last week that companies were using FRS 17 as an excuse for 'the first serious attempt to reduce pay and conditions for staff since the 1930s slump'. The average cost to an employee moved from a finalsalary scheme to an alternative was £40 a week, it estimated.

A Dixons spokeswoman said the shift would give the company 'more certainty' about the future cost of pension provision. The new scheme was more flexible and Dixons hoped it would attract a greater proportion of younger employees.

Most watched Money videos