Unions attack 'vermin' at Rentokil

Fears grow that other big firms will follow lead of rat-catcher and scrap final salary pensions

Directors of the rat-catching company Rentokil Initial were described as "vermin" yesterday after announcing plans to scrap the final-salary pension scheme for existing employees.

The attack, made by Derek Simpson, the general secretary of the union Amicus, came as experts warned Rentokil was likely to be the first of many companies to renege on existing pension commitments over the coming months.

Ros Altmann, a government pensions adviser, said while a wave of scheme closures may be unpopular, companies could simply no longer afford to continue honouring their final-salary pension promises.

"You have to ask yourself 'Is it better to keep pretending they can afford this kind of pension provision or is it better to face the fact they can't?'," she said. "[Rentokil] will be the first of many. I'm amazed the likes of British Airways and BAE haven't done it so far - they will never be able to honour their pension benefits in full."

The National Association of Pension Funds agreed, saying it was aware several other larger companies had been considering a similar move to Rentokil's.

A spokesman for British Airways, which has one of the largest pension-scheme deficits in the UK relative to market value, said it was consulting employees over how to address the its enormous pension black hole. Although the management is believed to be keen to close the scheme entirely, it is wary of setting itself up for another clash with the unions.

BAE Systems, another FTSE 100 company with an enormous deficit, said closing down its final-salary scheme completely was not on the agenda. It said it would announce details of plans for the scheme in the new year.

The TUC, Amicus and the GMB union hit out at Rentokil yesterday, complaining it was outrageous the company had released the news to the media before consulting employees.

Although Rentokil, like many other British companies, closed down its final-salary scheme to new members four years ago, its move to close it to existing members is almost unprecedented among large organisations - and a first for a FTSE 100 company. Andrew Macfarlane, Rentokil's finance director, stressed on Monday the move would affect just 3,000 of Rentokil's 48,000 employees, and would not affect the pensions of those who have left the company or pensions of the 8,000 members who have retired. Unions said they were investigating whether such a move was a breach of the terms of their staff's employment.

Amicus's Mr Simpson registered his anger over Rentokil's decision in language rarely used by senior union leaders. "Only an anti-union company like Rentokil would be able to get away with taking a long pensions holiday, only ending last year and then move immediately to close its pensions scheme to existing members," he said. "They have behaved like the vermin they are paid to extinguish. This is an important lesson to every worker - make sure the company you are employed by recognises unions."

But Dr Altmann said: "If the unions fight and get some kind of a deal, it will only be staving off the inevitable."

The TUC's general secretary, Brendan Barber, warned: "Employees in other companies should seek reassurances that their employers do not have similar plans. "

The GMB, thought to have the most members at Rentokil, said it was considering legal action and seeking an immediate meeting with management.