Foods group Greencore is involved in discussions with trade unions MSF and SIPTU on a proposal to introduce a defined contributions (DC) pension scheme for new employees and also to amalgamate existing separate pension schemes for manual grades and white-collar staff.

Greencore employs about 3,000 people in Ireland and its proposal to introduce a DC scheme while freezing its existing defined benefits (DB) scheme is thought to be one of the first such moves by a major Irish employer.

Under the terms of the proposal, existing staff would retain their DB pension but new employees would enter a new DC scheme.

Defined benefits pension schemes provide a guaranteed level of pension - linked to an employee's length of service. In contrast, defined contribution schemes do not provide a guaranteed level of pension and pensioners' benefits are dependent on the performance of the fund.

There is a growing move in both Ireland and the UK towards defined contribution schemes and most of the so-called "new economy" industries operate DC schemes.

But sources in the pension industry have indicated that one Irish employer in 12 is currently considering closing their existing DB schemes to new employees and instead putting them into DC schemes.

Greencore is thought to be one of the first "traditional" industries to formally propose closing its DB scheme and opening a DC scheme for new employees. While some unions have taken policy decisions to resist the introduction of DC schemes, others are thought to be adopting a position that as long as existing members of DB schemes have their status preserved, then they are not opposed in principle to DC schemes for new employees.

Greencore sources said the proposal to switch to DC for new entrants is not a cost issue, but one of liability. People are, in general, living longer and this has potentially serious implications for the funding of DB schemes which guarantee a level of pension which is usually indexed to inflation up to an upper limit.

The introduction of the FRS17 accounting standard, which requires firms to recognise pension surpluses or deficits on their balance sheets is another factor in the move towards DC schemes, as regular variations in the funding of the pension scheme would then have an impact on earnings.

As well as looking for an introduction of a DC pension scheme for new employees, Greencore is also seeking to amalgamate its existing manual and staff schemes.

MSF official Ms Noirin Greene said the company had not yet submitted a detailed proposal to the unions while the unions themselves were looking for improvements in the schemes, including the integration of the State pension and a lowering of the retirement age.

The Greencore pension schemes are currently in solid financial shape with the last actuarial valuation showing that liabilities are covered 116 per cent by the funds' assets. The Irish schemes had a surplus of more than €85 million although the British schemes show a deficit of almost €30 million.

Further negotiations on pensions between Greencore and the unions are expected this week.