Arnotts pulls out of defined benefit scheme

RETAILER ARNOTTS has informed the trustees of its defined benefit pension scheme that it will cease making contributions to the plan in December.

Notice of this decision was given by the Dublin-based department store group in June.

Speaking to The Irish Times yesterday, Arnotts chief executive Nigel Blow said the decision was “very unfortunate” but added that it was in line with what many other Irish companies were doing in the current economic climate.

AIB recently closed its defined benefit pension scheme and opened a defined contribution one for employees. “As a business, we can’t continue to support the defined benefit scheme that is in place at the level required,” Mr Blow said. The company was in negotiations with the trustees on the future of the plan.

Arnotts is also in talks with the trustees and the company’s trade unions on establishing a defined contribution scheme for staff for future service.

Arnotts’ latest accounts show that its pension scheme had a net liability of €1.86 million at the end of January 2011.

Arnott’s defined benefit scheme has about 900 members, comprising active, deferred and pensioners. About 230 are active members still working with the company. Staff with fewer than three years’ service pay a contribution of 7 per cent of their pensionable pay to the scheme, while those will more than three years of service pay 3 per cent.

Traditionally, the company has matched employee contributions. It is understood that the level of contribution required by the company would have to increase substantially in the future to address the funding needs of the scheme.

The combined contribution from staff and the company could be as high at 30 per cent, according to sources.

In the past, the Arnotts scheme has been one of the best-funded in Ireland. However, it has slipped into the red during the economic downturn of the past four years.

In the year to the end of January 2011, Arnotts recorded a loss of €27.2 million, much of it relating to restructuring charges, interest payments and property impairment costs. It made an operating loss of €6.6 million during the period.