Honda Move to Raise Age of Retirement May Set Trend
, Financial Times
March 22, 2003
Companies are to be
urged to consider increasing the retirement age for workers to tackle the
soaring costs of pensions after Honda, the Japanese carmaker, broke the
taboo on raising the age of departure.
National Association of Pension Funds will say in a report in May that
raising the retirement age is an alternative to closing popular final
The NAPF believes
other companies will risk a showdown with unions in order to follow Honda
by making employees work longer to qualify for a full pension.
"The way we see
the wind blowing is that people will be having to work longer to pay for
longer retirement [because of longer lifespans]," said Paul Barton,
member services manager at the NAPF and author of the report. "You
can expect more companies to go this way but of course they will have a
right royal wrestle with the unions."
Honda has attempted
to bypass its union, recognised only last year, by writing directly to its
4,300 staff in Swindon to tell them of the increase in retirement age from
60 to 62.
Honda said the
yawning gap in its pension fund - £42.5m last March - meant it had to
take the action to preserve the scheme. Since the last published
valuation, the deficit is certain to have ballooned, as the entire £71m
fund was invested in shares. If it fell in line with the 28 per cent drop
in the market since then, its assets would be less than half those needed
to pay promised pensions.
Other companies have
reacted to falling markets and increased lifespans by stopping final
salary pensions for new workers, increasing staff contributions, cutting
the value of benefits and switching investments from shares to lower-risk
situation is so bad that it is also closing the scheme to new employees,
increasing staff and company contributions and injecting £10.2m of its
put the scheme on a firm financial footing for the future and we are
pleased to be able to respond to the requests of [workers] to maintain the
scheme," Honda said. The company will reconsider whether to let new
employees join the final salary scheme in future if the deficit goes away.
company, which has lost a cumulative £390m from Swindon since opening in
1989, already faced a difficult round of negotiations with Amicus after
recognising the trade union last year.
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