20/02/2002

CIPD warns businesses to 'think again' on pensions

Abolishing final salary pension schemes for employees who are already building up entitlements under them could seriously damage the ‘psychological contract’ between employers and workers.

This is according to people management experts the Chartered Institute of Personnel and Development (CIPD), who were responding to the evidence that some large companies are replacing final salary pension arrangements for current staff.

CIPD employee relations adviser Mike Emmott warned: “Where businesses fail to meet expectations about pensions, they risk damaging the trust between employer and employee.

"This is likely to adversely affect motivation and productivity, as employees feel that their employer no longer feels the same level of commitment to them. This will be reinforced if the employer also reduces its financial contribution to the scheme."

Mr Emmott concluded by saying that organisations should consider the positive impact of final salary schemes on retention of staff, and the effect on the bottom line of losing key people.

He also said that final salary schemes would not be equally suitable for all organisations, but employers should ensure that any changes in existing schemes were fully explained to employees.

(MB)

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