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Rentokil puts final-salary scheme into mothballs

Fears that more companies could follow Rentokil by freezing schemes for existing members

Rentokil Initial is set to become the first FTSE100 firm to close its final-salary scheme to future accrual for current staff.

Several blue- chip firms have closed final-salary schemes to new entrants but Rentokil plans to extend this to existing members to curb its pension liabilities.

The scheme will be made paid-up and members will have their guaranteed benefits frozen at the current level.

There is concern that the group’s decision could encourage other companies to do the same. The aggregate pension deficit that is currently faced by FTSE 100 firms is estimated at around £40bn.

Rentokil will make an immediate payment of £200m to reduce its £325m deficit and pay off the rest by January 2012.

Informed Choice managing director Nick Bamford says he expects many firms to make similar moves and believes Rentokil made the right decision from a corporate perspective.

He says: “If a company allows people to build up these defined benefits, it is building a greater future liability. But if I were a scheme member, I would disagree enormously with the move.”

Staff at off-licence chain Unwins also have cause for concern about their pension arrangements after the firm went into administration on December 19 and it emerged that pension contributions for October and November had been taken from salaries but not paid into the scheme.

The scheme is operated by Friends Provident , which is trying to trace the payments. A spokesman says: “As we understand it, people will not be left out of pocket as a result of the situation at Unwins.”

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