Michelin to Change UK Pension Scheme

The retirement plans of 4,000 Michelin employees in the UK – including workers at the Stoke-on-Trent, Dundee and Ballymena plants and ATS employees – have been affected by the company’s planned closure of its final-salary pension scheme to existing members and decision to transfer staff onto a money-purchase plan. The company said this decision was made in the face of a continued deficit of more than £250 million, despite the fund receiving a £100 million top-up in recent years. In 2002 the company’s UK pension deficit sat at only £57 million.

The proposed changes would see members of its pension scheme cease building up any further benefits from January 1, 2009. Accrued pension benefits will be preserved and will remain linked to the employee’s final salary at retirement. Michelin stated that it plans to pay off the deficit in its final salary scheme over the next decade.

Michelin’s decision has been slammed by unions, who are sceptical about the possibility of significant concessions being reached during a 90-day consultation period. Union representatives have refused to rule out industrial action. Rob Taylor, the Transport and General Workers Union’s convenor at the Stoke-on-Trent factory, said “we will go into the consultation with our eyes open and we’ll call for meaningful talks and serious consideration of alternatives to closure but our fear is the company has made its mind up.”

Last year 150 British firms closed their final-salary schemes to new members, and the Pension Protection Fund recently disclosed that almost 60 per cent of companies currently do not allow staff to enter into final-salary schemes. While only a handful of companies have so far taken the same action as Michelin and excluded existing staff from these schemes, the number of businesses doing this is expected to rise, with the actuaries Lane, Clark & Peacock forecasting that most of the UK’s FTSE 100 companies may close final-salary schemes to both new and existing employees over the next five years.