Article date: 26 February 2003
RAC plc, like most other UK employers, has recently reviewed itsfinal salary pension scheme to assess the impact of the decline instock markets over the past three years, and the increased cost ofproviding pension benefits. As a result of this review the Companyis taking the following actions:
1. Maintaining its final salary scheme for existing and newemployees, and extending the scheme to younger employees, who werepreviously unable to join due to a minimum entry age of 25.
2. Increasing Company contributions to the scheme to reduce thedeficit, which has arisen as a result of falling stock markets. Thedeficit under FRS17 stood at £129 million net of tax at 31 December2002. The Company will increase its cash contribution by £2.5million in the second half of 2003 and by £5 million a yearthereafter.
3. The cost of providing pension benefits for the future hasincreased significantly. This is primarily because people areliving longer, typically drawing a pension for twice as long asthey did in the 1960s, which requires a proportionate increase infunding. In addition, tax changes & lower anticipatedinvestment returns are also increasing costs. To maintain its finalsalary scheme, RAC plc will share the increase in costs withemployees, who will be offered the choice of reduced future benefitlevels or increased employee contribution rates from 1 July2003.
These actions have been agreed in consultation with PensionTrustees, and, where appropriate, unions, employee groups and legaland actuarial advisers.
Andy Harrison, Chief Executive, RAC plc, said: “As aservice business, our people are the key to our continued success.The actions we are taking will secure the future of our pensionscheme, which provides a valuable benefit to all our people. Thechanges also provide the flexibility for people to choose theirpreferred level of pension benefit.”
Bill Morris, General Secretary, Transport and General WorkersUnion commented: “We are very pleased that RAC is retainingits final salary scheme. The company has demonstrated itscommitment to a long-term solution to a difficult issue.”
For more information contact:
Anne-Marie Hill, Corporate Communications Manager, RAC plc 01628843 722
Anita Scott / Stuart Bruseth, Brunswick Group 020 7404 5959
E-mail: firstname.lastname@example.org Website: www.racplc.co.uk