Philips Electronics will close its trust-based money purchase pension scheme in April and replace it with a contract-based stakeholder plan in an attempt to cut administration costs, eradicate age-related contributions and encourage employees to save for their retirement.
Under the existing money purchase scheme, employer contributions are fixed depending on the age of the staff member, and employees who make additional voluntary contributions (AVCs) do not receive any extra employer contributions.
Nina Platt, UK reward manager, said: “At the younger end of the scale the contribution rate is not terrific. We want staff to make what contributions they like and have them matched.”
Under the new stakeholder scheme, staff who contribute between 2% and 4% of their salary will be entitled to an employer contribution of 1.5 times the amount they have paid into the scheme. Those who contribute above 4% and up to 10%, will receive an additional 1% contribution from Philips.
Staff can make contributions via salary sacrifice resulting in tax and national insurance (NI) savings for staff and NI savings for the firm.