Northern Rock to close final salary pension scheme

Northern Rock said today it will close its final salary pension scheme as the beleaguered lender prepares to return to the private sector.

The banking group – which was nationalised in February 2008 – also said around one in seven staff will lose their job before the end of the year.

Chief executive Gary Hoffman said the headcount needs to shrink by around 650 staff to reflect the smaller size of the business. The banking group - which was split in two at the beginning of the year - currently employs around 4,500 staff.

Hoffman said: ‘We remain in public ownership and it is important that we continue to deliver value for taxpayers.’

‘There is still a challenging economic environment and in order to meet our objectives, we must align our staffing level to match the smaller size of the business, increase efficiency and reduce our cost base,’ he added.

The company has begun a formal 90-day consultation period with Unite, the union, and other employee representatives and said it hopes compulsory redundancies will be avoided.

Pension closure

Northern Rock plans to close the final salary section of the Northern Rock Pension Scheme to future accruals.

Members of the final salary section of the scheme will be offered future membership in the money purchase section of the scheme, it said.

Rob MacGregor, Unite national officer said: ‘It is unacceptable that we are now seeing rash decisions based on a short-term management strategy in order to make Northern Rock appear more attractive to a private seller.’

He called on the government to step in to prevent this business being dramatically scaled back and prepared for sale.  

The move is the latest in a series of moves designed to make the group a more attractive proposition either for a buyer or for remutualisation.