US-owned firm blames downturn as it suspends contributions to employees’ stakeholder scheme for 18 months

More than 6,000 UK staff at American Express were today contemplating a meagre retirement income after their US-owned employer told them it was suspending pension contributions for the next 18 months.

The company said payments to its occupational retirement scheme were unaffordable in the current economic downturn, though the situation would be kept under review.

Until this month American Express paid a core contribution of 3% of salary into the stakeholder scheme, with a pledge to match contributions of up to 6%.

The largely non-unionised workforce has accepted the deal, which applies to July salary payments.

Stakeholder pensions are personal retirement plans created by the government as a cheap alternative to trustee-based schemes.

Employers are under no obligation to make a contribution and have no responsibility for the success of the stockmarket-invested plans. Most have gone down in value by more than 30% over the last year, following a sharp decline in share values.

The company’s staff are based mainly in Sussex at centres in Brighton and Burgess Hill, with a headquarters in London’s Belgravia.

Much of the recent debate on pensions has focused on the affordability of guaranteed schemes, enjoyed mainly by public sector workers and older workers in the private sector. In these employers typically pay contributions worth more than 20% of salary.

Steve Webb, the Liberal Democrats’ pensions spokesman, said the company was undermining an already inadequate pension plan. “The danger is that employers are in a race to the bottom and are taking advantage of a situation that offers staff no protection.

Independent pensions consultant Ros Altmann said the choice commonly put before many employees was between cuts in pay, hours or pensions. “It is obvious that most workers, and especially younger workers, will opt to preserve their incomes,” she said.

“It’s part of a wider picture where employers have less and less involvement in pensions and individuals are left to look after their own retirement. The American Express scheme is already poorly funded and will have seen its value fall like other stockmarket-based schemes.

“It all makes for a pretty grim picture with confidence in pensions crumbling by the day,” she said.

Like other major US finance companies American Express has benefited from the taxpayer bailout to protect it from collapse. In the last quarter of 2008 its profits collapsed 79% on the same period a year before to $172m (£105m), but recovered in the first three months of 2009 to $443m.

US-owned firm blames downturn as it suspends contributions to employees’ stakeholder scheme for 18 months

More than 6,000 UK staff at American Express were today contemplating a meagre retirement income after their US-owned employer told them it was suspending pension contributions for the next 18 months.

The company said payments to its occupational retirement scheme were unaffordable in the current economic downturn, though the situation would be kept under review.

Until this month American Express paid a core contribution of 3% of salary into the stakeholder scheme, with a pledge to match contributions of up to 6%.

The largely non-unionised workforce has accepted the deal, which applies to July salary payments.

Stakeholder pensions are personal retirement plans created by the government as a cheap alternative to trustee-based schemes.

Employers are under no obligation to make a contribution and have no responsibility for the success of the stockmarket-invested plans. Most have gone down in value by more than 30% over the last year, following a sharp decline in share values.

The company’s staff are based mainly in Sussex at centres in Brighton and Burgess Hill, with a headquarters in London’s Belgravia.

Much of the recent debate on pensions has focused on the affordability of guaranteed schemes, enjoyed mainly by public sector workers and older workers in the private sector. In these employers typically pay contributions worth more than 20% of salary.

Steve Webb, the Liberal Democrats’ pensions spokesman, said the company was undermining an already inadequate pension plan. “The danger is that employers are in a race to the bottom and are taking advantage of a situation that offers staff no protection.

Independent pensions consultant Ros Altmann said the choice commonly put before many employees was between cuts in pay, hours or pensions. “It is obvious that most workers, and especially younger workers, will opt to preserve their incomes,” she said.

“It’s part of a wider picture where employers have less and less involvement in pensions and individuals are left to look after their own retirement. The American Express scheme is already poorly funded and will have seen its value fall like other stockmarket-based schemes.

“It all makes for a pretty grim picture with confidence in pensions crumbling by the day,” she said.

Like other major US finance companies American Express has benefited from the taxpayer bailout to protect it from collapse. In the last quarter of 2008 its profits collapsed 79% on the same period a year before to $172m (£105m), but recovered in the first three months of 2009 to $443m.