Legal & General is attempting to limit its growing final salary pension liabilities by proposing that only the first 2% of an annual pay rise should be taken into account when determining pensionable salary.
The insurance group, which closed its defined benefit (DB) scheme to new recruits 10 years ago, has proposed the changes in order to protect the long-term future of the plan. Approximately 1,300 of its 8,500 employees are still eligible for the final salary scheme. When last valued in 2006, the final salary plan had a deficit of £66million. Legal & General is currently consulting with employees over the proposed change.
A spokesman for the insurance group said: “Legal & General reviewed its DB plan and looked at all the options to ensure it is fundable in the long term. [It] is proposing to cap increases to pensionable salary at a maximum of 2% each year for its DB plan as we believe this achieves [its] aim of balancing increasing plan risk against future funding of the plan. We are consulting with plan members and employee representatives on these changes.”