Anglian Water, Huntingdon, England, froze its defined benefit plan and launched a new, improved defined contribution plan in its place following a discussion with the unions and employees, a spokeswoman said.
All employees will move to the Anglian Water Defined Contribution Scheme, managed by Legal & General Investment Management, she added.
The £57 million ($79 million) defined benefit plan closed to new participants in 2002. Employees hired after that will move to new DC offering from an existing DC plan. The pension plan has a £279 million deficit.
In a one-off deal, participants of the DB plan, which constitute around 25% of all employees, will get a pay increase of 3% this year and another 3% next year.
The new DC plan provides more flexible benefits, including health-care coverage, plus a 12% employer contribution for all employees. Former DB plan participants will receive a 14% employer contribution for two years.
The spokeswoman cited affordability as one of the key reasons for freezing the pension fund.