Vodafone to drop final salary pension scheme

The telecoms company wants its workers moved to a defined contribution scheme, a move that has prompted industrial action at other technology companies

Vodafone plans to scrap its final salary pension scheme, a move that will affect a third of its British workforce.

The telecoms company began discussions with its staff about the proposed change at the beginning of the week, a Vodafone spokesperson said on Friday.

"The final salary pension scheme is costly to operate, and costs are rising," said the spokesperson. "We're currently in consultation with employees with a view to transferring them to our defined contribution scheme."

The current scheme, under which a pension is calculated on final salary and length of service to the company, is worth around £755m. In the defined contribution scheme, Vodafone would contribute twice the employee contribution, said the spokesperson.

The affected workers number approximately 4,000, the spokesperson said, adding that a percentage of contracts will need to be renegotiated to accommodate the changes. The Newbury-based telecoms firm has retail stores throughout the UK, as well as offices in London and elsewhere.

The Vodafone spokesperson said the company is not heavily unionised, and that the consultation with employees over the pension scheme had not involved any union representation.

A number of companies are pushing through plans to cut final salary pension schemes. Earlier in November, workers at HP voted to strike over proposed changes, while a strike at Fujitsu which involved pension cuts was averted by last-minute negotiations at the beginning of the month.

Also this week, communications technology company Telent announced it will eliminate its final salary pension scheme.

Telent, which was spun out of Marconi in 2006, announced on Tuesday that it was in consultation with UK employees and the union Unite over the proposed dropping of the scheme, which it plans to end on 5 April, 2010. Approximately 1,300 Telent employees will be affected.