EDS stops final salary pensions for recruits

EDS has been accused of creating a two-tier workforce among its UK staff by announcing the end of final salary pension schemes...

EDS has been accused of creating a two-tier workforce among its UK staff by announcing the end of final salary pension schemes for new employees.

The decision to stop offering the final salary pension scheme to people joining the IT services company from April could see new recruits up to 30% worse off than colleagues who are covered by the final salary scheme.

The new pension scheme only guarantees how much EDS will pay into a scheme, not what the pension will be worth when its holder reaches retirement.

However, EDS will retain the option of reopening the final salary schemes when bidding for contracts.

Pensions are a major concern for IT staff who have to transfer to a supplier under an outsourcing contract because pension arrangements are not fully protected under Tupe regulations.

Peter Skyte, national secretary of IT professionals association Amicus, said, "This transfers the risk of future pension provision largely from the company to the employee and creates a two-tier workforce after April. This does not fit with EDS' aspiration to be the employer of choice."

EDS said it had reviewed its UK pension provision in a bid to ensure its pension offerings were more competitive in the outsourcing sector and were appropriately funded to meet future needs.

Many firms have axed final salary schemes and replaced them with defined contribution schemes during the past year. This has fuelled fears of a pensions crisis.

Companies that have stopped final salary pension arrangements have cut the amount they pay into the replacement schemes by a third, according to recent research. The survey of nearly 300 pension schemes also found that some firms have reduced the amount they pay into replacement schemes by as much as a half.

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