DSG closes DB scheme
Electrical retailer stops future accrual despite strong company results
DSG International, owner of the Dixons, Curry’s and PC World retail chains, is to close its defined benefit (DB) pension scheme to future accrual. The company simultaneously announced impressive results for the crucial Christmas trading season.
Despite reporting better than expected sales of televisions, computers, fridges and food mixers for the period, DSG will start a consultation on closing its DB scheme to its 2400 members.
The company expressed concern that, while Christmas trading conditions were favourable, there was a real possibility that these have not continued into the New Year. The increase in VAT from 15% to 17.5%, which came into effect at the start of the year, may have brought forward consumers’ purchases.
"DSG is the first this year to announce it will close its final salary scheme to future accruals," said Robert Gardner, Co-CEO at investment strategy and pension risk consultancy Redington.
"The impact on defined benefit pension schemes is twofold: those that wish to remain open must revaluate the risks they are running and review membership benefit structures. Schemes that close need to ensure that replacement benefits are funded by adequate contributions from both members and employers."
During 2009 the closure of DB schemes accelerated with Barclays, Morrisons and Vodafone all closing their schemes.
"For the vast majority of the UK population, funding retirement is becoming increasingly dependent on a well designed defined contribution scheme. It is therefore essential that such schemes are sustainable and offer flexibility," he added.