Germany-based BMW Group is proposing to freeze its two U.K. defined benefit funds to future accruals on June 1, affecting around 5,000 employees.
The automotive group's latest annual report showed that U.K. defined benefit assets totaled €8.2 billion ($9 billion) at Dec. 31, with a deficit of €1.2 billion.
If the proposals are implemented, all employees will join the firm's defined contribution plan, which was launched in 2014 for new employees. The plan has more than 2,000 participants. Details on the size of the DC plan or contribution rates could not be learned by press time.
“Many U.K. companies have significant pension fund shortfalls in their defined benefit schemes, and the cost and risk associated with these schemes is making them increasingly unsustainable and unaffordable for both members and companies,” said a statement provided by a BMW Group spokeswoman. “BMW Group has always prided itself in providing excellent pensions for its staff and wants to act now to protect future pension provision for all its staff and to help protect the cost competitiveness of the U.K. as a manufacturing base.”
The firm is consulting with its employee representatives about the proposal. The 60-day consultation period is due to begin Thursday, and letters were sent Monday to participants of the pension funds from the firm, said a news release from U.K. union Unite.
The BMW spokeswoman did not respond to follow-up questions by press time.