Royal Bank of Scotland announces closure of final salary pensions for new recruits

LONDON – The Royal Bank of Scotland has announced that it would be closing is final salary pension scheme to new recruits from October this year. In lieu of his, new members will be given a 15 percent annual pay rise with the option to spend it as they liked.

The RBOS becomes the latest big name employer to close its final salary pension scheme. Many companies have announced such measures after the stock market crash in 2000-2003 resulted in a huge deficit in pension funds. Currently there are 225,000 members in the final salary scheme in Royal Bank and at the end of 2004, the pensions deficit for the Bank stood at 1.9 billion. The RBOS scheme does not require staff contributions and is entirely funded by the Bank.

The Edinburgh-based bank has already contributed 933 million as an exceptional payment into the fund and doles out about 380 million a year. Commenting on the new scheme, Neil Roden, the bank’s head of personnel said that it would offer new members more flexibility and choice. “It is important to stress that for existing staff if they do nothing, nothing changes,” he added.

“But a one-size-fits-all solution is no longer appropriate for the demands of a 21st century workforce who require flexibility to meet their needs in different ways at different times in their lives.”

RBS also said that the new plan made no difference to its 50,000 pensioners or its 90,000 deferred members. The latter belong to the group that has since left the bank, but is yet to draw its pensions. Additionally, 85,000 current staff of the bank will also be offered the option of leaving the scheme for an exchange of a 15 percent annual pay rise. They can keep the extra money, invest it in the bank or make alternate pension arrangements, the bank said.