Plans to change the final salary pensions of hundreds of workers have hit the rocks for drinks firm Diageo.
The global giant, which includes brands such as Smirnoff vodka, J&B whiskey and Johnnie Walker scotch wants to change the terms of a final salary pension package for 1,700 workers.
The company has discussed the changes with staff and unions for six months and has now started formal negotiations to redesign the scheme.
The company argues the pension package is too expensive because workers are living longer and that several other options are available.
“No decisions have been made and all sides are talking,” said a spokesman for the firm.
Inferior pension package
However, GMB, the union that represents 1,500 Diageo workers mainly based in Scotland is taking a ballot recommending no one accepts the proposals.
The union claims most employees taking the offer would be worse off, and collectively, the plan put forward by the company amounts to a cut of £30 million in pension payments.
“The company wants to move current employees to a plan with inferior terms and start new employees on an inferior scheme. This is a race to the bottom for pension provision by Diageo,” said a union spokesman.
“The company’s success is built on the hard work of employees and their reward for their success is a cut in the value of their pensions.”
The union also explained that Diageo CEO Ivan Menezes has an annual remuneration package of £3.5 million, including pension contributions worth £458,000.
Pension black hole
The GMB wants workers to give a mandate for tough industrial action to deter the company from changing the terms of the pension scheme.
A final salary pension pays a guaranteed retirement income based on length of service and often two-thirds of final salary before retirement.
Many companies have closed final salary pensions to new staff and are urging employees in the schemes to shift to pensions based on stock market performance.
The latest estimates suggest final salary scheme are underfunded by almost £900 billion.
The underfunding is the difference between the amount the schemes are scheduled to pay out less the value of assets generating the cash to pay the liability.
