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Royal Bank of Scotland shuts final salary pension scheme

17 May 2006

Royal Bank of Scotland became the latest in a string of major UK companies to shut its final salary pension scheme to new employees. The change came just two months after Sir Fred Goodwin, the chief executive, vowed to honour the "emotional contract" made with staff over their pension benefits. However, from October the bank will instead pay new employees an extra 15 per cent on their salaries to spend as they choose.

Existing members of the final salary scheme, which is non-contributory for employees, will also be given the choice to opt out and take the extra pay. The bank has about 90,000 employees and 225,000 current and retired staff in its final salary scheme. It made pre-tax profits of almost £8bn last year, but liabilities within the pension scheme were £1.9bn more than its assets.

Neil Roden, the bank's head of personnel, said the new plan would offer staff greater choice and flexibilty.

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