American Express has stopped making payments into its stakeholder pension schemes and therefore has effectively cut the pay of 6,000 staff.
As more and more companies announce changes to their stake holder pensions, American Express are the largest company to stop making pension payments.
The changes were made on July 1st and see American Express suspending payments of around 3% – 9% from employee salaries into stakeholder pensions.
An independent financial adviser said that this would effectively be a pay cut for all employees in the pension scheme and is likely to be a move copied by other companies avoiding financial problems.
Because pensions are like deferred payments, a reduction will mean pay cuts of around £3,600 a year for those earning £40,000. The payment freeze on pensions will continue for a max of 18 months to January 1st, 2011.
With this is mind the Government has pledged that from 2012, it will be illegal for companies to stop paying into their pension funds.
Staff at the American Express call centre were asked to comment, but said that they were unwilling to comment.
American Express have argued that this is just one of the cost cutting measurements that they have had to bring in.
American Express boomed between 2003-2007, but this year recorded a loss of 56% net income.