BMW's UK workers stand to lose amid the German automaker's plans to change its pension schemes. BMW reportedly wants to close its two defined benefit schemes (DB) for 5,000 employees and shift them towards a less generous defined contribution (DC) plan.
A DB pension plan is one where an employer promises a specified monthly benefit on retirement that is based on the employee's earnings history, tenure of service and age. A DC plan on the other hand is one where the employer, employee or both make contributions on a regular basis. These are less remunerative to employees as the pension income they will receive is dependent on the amount saved and on individual investment returns.
BMW is said to now want its employees to stop paying into its two gold-plated final salary pension schemes. The German company intends to close both these DB schemes, which are in deficit. Instead, BMW wants its workers to make fresh contributions to its DC scheme, which was started in 2014 and already has about 2,000 members.
This comes at a time when DB schemes have become increasingly unaffordable for many companies. There are many companies who have scrapped these and moved on to adopt DC schemes, which are less expensive for them.
Last month, Royal Mail informed its employees that it could close its "gold-standard" pension scheme as it had become "simply unaffordable". It was then said that this could lead to a reduction in pension to more than 90,000 employees.
Commenting on the same, a BMW spokesman was cited by the Telegraph as saying, "Many UK companies have significant pension fund shortfalls in their defined benefit schemes and the cost and risk associated with these schemes is making them increasingly unsustainable and unaffordable for both members and companies.
BMW Group has always prided itself in providing excellent pensions for its staff and wants to act now to protect future pension provision for all its staff and to help maintain the cost competitiveness of the UK as a manufacturing base."
Britain's biggest trade union, Unite reacted by saying it would oppose BMW's plans. Tony Murphy, national officer at the union, said: "It is clear that our members will be losing thousands of pounds a year in retirement incomes, if this proposal is allowed to go ahead. This is plainly unacceptable and Unite will be fighting this proposal tooth-and-claw."