Engine-maker Rolls-Royce has denied it is considering raising the retirement age for its workers in a bid to plug its £1.1 billion pensions deficit.

But the group said yesterday it was looking at a range of measures to close the funding shortfall, including changing the way pension benefits are calculated.

It was involved in a consultation process with staff and expected to have a solution in place by the end of the year.

The news follows a Sunday newspaper report that said the group was asking its staff to delay retirement until they were 65 rather than stop working at the current retirement age of 60.

But a Rolls-Royce spokesman said: "We are not asking employees to increase their retirement age from 60 to 65.

"We are in the middle of discussions with the workforce on how we can plug the pension deficit.

"Discussions are ongoing and this story is totally inaccurate."

The group faced a £1.1 billion pension shortfall at the end of 2002 under the new accounting standard FRS17, which does not allow firms to smooth out stock market volatility.

Most companies with final salary pension schemes are facing deficits due to stock market falls and increased life expectancy raising the cost of providing schemes.

Rolls-Royce has been hit worse than many other companies due to the large holdings it has retained in shares.

The group, which has its head office in London and major plants in Bristol, the Midlands and Scotland, has said it plans to keep its final salary scheme open but it is consulting with workers on ways to reduce its cost.

Among proposals being put forward are basing the pension workers receive on their average salary during their time with the company rather than the amount they were paid immediately before they retired.

It is also considering changing the rate at which staff accrue their pension from one sixtieth of their salary for every year they are a member of the scheme to one eightieth.

Monday July 28, 2003