The introduction of the stakeholder pension scheme has forced Crest Packaging to abandon its own final salary scheme after failing to meet minimum funding requirements (MFR).


The government ombudsman had stipulated that to keep the scheme, it would have to double its contribution, which it couldnt afford.


"When you remove a company pension fund, you remove the guarantee and make it much more volatile, but we had no choice," said Crest managing director Roy Cook.


The government is looking at reviewing the MFR, which is seen by some as too demanding.


With final salary schemes, the employer makes a promise to pay a percentage of salary on the employees retirement. If there is a shortfall the company bears the financial liability.


But stakeholder schemes are a build-up of funds throughout employment that are invested in the Stock Market, so carry more risk.


"Anything causing a company to move away from its final salary scheme is a bad thing," said Barry Dixon, consultant at the Printing Industry Pension Scheme (PIPS).


"The last thing the government wants is for people to move away from company schemes."


Crests plight was highlighted in The Guardian last Saturday (28 April). Its new scheme will require its 500 employees to contribute 4% of their salary, while the company will contribute 2-14%, depending on the employees age.


This compares to the original final salary scheme, where the employee contributed 6% and the company 9.5%.


But Crest said that taking into account the age bands of both schemes, this equated to the same contribution (9.5%) as the old scheme.


Story by Jeremy Allen