Crunch Talks to Begin Over JTI Pension

Talks begin with management on Thursday after members of the Gallaher final salary defined benefit scheme were told their pension would be closed to future accrual at the end of the year.



Simon Dawson

Executives at cigarette maker Japan Tobacco International will hold crunch talks on Thursday over the company’s plans to close the Gallaher final salary defined benefit scheme to future accrual.
JTI – which purchased Gallaher in 2007 – is proposing to close the pension plan to further benefit accruals beginning December 31, 2017, subject to a period of consultation with employee representatives, according to a statement from U.K. trade union Unite.

The company is planning to switch to a defined contribution scheme, following an ongoing trend of British employers closing their defined benefit schemes in favor of cheaper DC alternatives. In August, a survey of defined benefit pension schemes, conducted by investment consultant LCP, found that companies in the U.K.’s FTSE 100 index had a combined pension deficit of £17 billion ($22 billion).

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In the statement, trade union officials said members of the scheme were “furious” at the decision due to the fact that JTI had posted £4 billion in profits during 2016 and paid out £1.6 billion to shareholders.

“Our members are set to lose thousands of pounds in retirement income once they are transferred to the new defined contribution scheme,” said Phil Silkstone, regional officer at Unite.He noted that the new top contribution rate from the employer to the defined contribution plan would be 16 percent instead of the 46 percent made in the final salary scheme. Silkstone said the trade union delegation would be requesting that more funds are put directly into the workforce’s pensions at the October 12 meeting at the company’s Weybridge offices. The union claims that colleagues working in the Netherlands were given a more favorable deal when changes were made to their pension scheme.


A JTI spokesman confirmed that JTI is planning to close the defined benefit scheme at the end of the year.

“The company has entered into a period of consultation with trade union and other employee representatives about the proposals, which remain subject to such consultation,” he said.
The spokesman said that the company would not comment further until the consultation period had concluded.

JTI has been cutting costs in recent years as it seeks to become more cost-efficient. In 2014, the company announced it would be closing the County Antrim factory with the loss of 800 staff jobs by 2017.

Gallaher is best known as the maker of British cigarette brands including Mayfair, Silk Cut, and Benson & Hedges. JTI paid $15 billion for Gallaher, according to a New York Times report at the time.