Balfour Beatty is consulting with staff about closing its defined benefit (DB) pension scheme to future accrual.
Its proposals would affect around 2,500 active pension scheme members, which represents about 10% of its workforce.
The consultation will end in May and the scheme closure will take effect from September.
In its Full year results 2012, published on 7 March, the construction firm reported aggregate pension deficits of £338 million, with net actuarial losses totaling £121 million in 2012.
It said its pension scheme’s losses are due to the lower discount rates applied to the funds’ obligations exceeding the better-than-expected returns on the assets held by the funds and revised mortality assumptions based on historical experience.
During 2011, the group made a pension increase exchange (PIE) offer to certain pensioners of the Balfour Beatty Pension Fund (BBPF) to forego their entitlement to future non-statutory inflationary increases in return for a higher pension. At 31 December 2011, 509 members had accepted the offer, which resulted in a £2 million reduction in obligations and a consequential past service cost credit of £2 million in 2011. The offer closed in February 2012.
A formal actuarial valuation of the pension scheme was carried out in March 2010 and a deficit-funding plan was agreed for eight years. Under the plan, the group is making regular monthly payments, which stood at £4.5 million at April 2012.
In anticipation of its triennial funding valuation on 31 March 2013, the group has agreed to make additional contributions of £1 million per month, payable quarterly, if the scheme’s funding levels in any given month are below certain self-funding targets set out in its funding plan. The first payment was made in January 2013.
A spokesperson for Balfour Beatty said: “Balfour Beatty is currently consulting about a proposal to stop future defined benefit (DB) accrual for the majority of employees in the pension scheme.
“The changes we are proposing safeguard accrued rights for employees in the DB scheme and provide an opportunity for them to build up pension benefits in a defined contribution (DC) scheme. Deferred members and pensioners would not be affected by this change.
“We believe these proposed changes are necessary to reduce the costs and risks with continuing to have future accrual in the scheme.”