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Hachette moves to plug £36m pension deficit
01.01.70 | Graeme Neill
Hachette UK is trying to close a pension deficit gap of about £36m, closing its two final salary pension schemes to new accruals next month but denying suggestions this move could lead to an exodus of staff.
The two schemes to close on 30th September, last valued at about £36m, are the Orion and Hodder final salary pension schemes. Hely Hutchinson notified the 246 affected staff at the beginning of May, with a consultation period of 60 days then taking place. The consultation involved 17 presentations and a number of letters, emails and Q&A sessions. The staff will be switched onto the company's defined contribution pension scheme.
Thirty-six people within the Orion pension scheme are still in talks with the company, due to the original wording of the scheme within their contracts that allowed for the provision of an "equivalent scheme" should the final salary pension scheme be closed. The discussion surrounds whether what Hachette is now offering represents an "equivalent scheme".
Hely Hutchinson said: "We went to great lengths to make sure our consultations, which began in May and closed in July, were meaningful, constructive and very civilised. We listened to each other and came up with an agreed set of terms that the committee of staff representatives described as a "fair compromise offered in a generous spirit". We believe everyone understands the reasons for our proposal to close the scheme to future accrual; the conversations we have had, and emails I have received, since we concluded our consultations, from members of staff affected, have been complimentary and positive. No one has left the company or handed in their notice as a result.”
He added: "There remains one issue, affecting a maximum of 36 members of staff, which we are looking at again, and we will do this with the same scrupulously fair approach as we try to bring to all such matters."
As a result of the consultation period, the company did improve its offer to affected staff, offering compensation and an extension of benefits, such as life insurance. The company has doubled the amount of money going into the scheme, doubled the compensation and doubled the typical company contribution rate since its initial offer.
The schemes had been closed to new employees since 2003, so it is only staff that have been with the company since before 2003 that are affected. No other final salary schemes remain at Hachette.
It is understood Hachette took the decision to close the schemes in order to ensure the schemes are financially healthy and can continue to pay the pensions as promised to their members, with factors in the decision including rising life expectancy rates and the performance of the schemes' investments, rather than the current performance of Hachette and the book market.
Hachette will pay an additional £8m into the scheme this year to help to close the gap, with £6m to go to one of the schemes and £2m going into the other. Orion's scheme has 87 active members, with the balance of the 246 staff at Hodder. It is understood that there are 1,360 members across both schemes, including deferred members and those currently taking their pensions.
An article in the Telegraph at the weekend reported some staff were upset by the handling of the situation and that some “starry” editors could leave as a result. However, both Hely Hutchinson and a company spokesperson said nobody had left the company because of the changes, and they were not aware of anyone planning to leave as a result of the change.
The trustee of Hachette’s pension fund is Hachette UK Pension Trust Limited, with commercial director Richard Kitson and deputy c.e.o. Peter Roche among the six members of the board.
It is understood Hachette and the trustee have agreed a deficit repair plan for each of the two schemes, with a plan to have filled the gap on both by the middle of 2017, though this is not a legal requirement.
The company has not had any discussion with The Pensions Regulator.