Pensions freeze is a slap in the face for GE employees

Bad news for workers at General Electric (GE). The company will be freezing retirement benefits for 20,000 employees in order to cut billions from its pension deficit and debt pile.

GE employee

Bad news for workers at General Electric (GE). The company will be "freezing retirement benefits for 20,000 longtime employees" in order to cut billions from its pension deficit and debt pile, says Peter Wells in the Financial Times. In addition to ending the accumulation of extra benefits for members of its US final-salary scheme, GE will offer to buy out about 100,000 former employees who are members of the scheme but haven't yet retired. This is CEO Larry Culp's latest move in an ongoing effort to turn the group around.

Transferring value from employees to shareholders in this way is a "bit awkward", but also necessary, says John Foley for Breakingviews. Shareholders have already "suffered" through dividend cuts and a share-price drop of 30% since Culp took over, so the idea that some employees will give up future benefits "isn't so mean". In any case, GE "isn't alone" in changing pension rules, with the 100 biggest US companies also slashing their unfunded liabilities.

There will be no change for retirees, while employees "will get to keep the benefits they've already accrued", says Bloomberg's Brooke Sutherland. Still, this will feel like a "slap in the face" for those employees who've stuck it out through some of the company's "darkest days". Although GE needs to reduce its debt load, the fact that workers, "are still paying the price for the company's mistakes" leaves a "bitter taste", especially since former CEO Jeff Immelt will keep his $85m in pension benefits despite his "ill-conceived" acquisitions and buybacks.

Recommended

The world’s fund managers are getting very bullish – be careful out there
Stockmarkets

The world’s fund managers are getting very bullish – be careful out there

The latest survey of fund managers shows them to be extremely bullish on all the same things. And that, says John Stepek, means the market is in dange…
21 Jan 2021
Five online retail stocks to diversify your portfolio with
Share tips

Five online retail stocks to diversify your portfolio with

Professional investor Tancredi Cordero, founder and CEO of Kuros Associates, selects five of his favourite online retail stocks to buy now.
18 Jan 2021
Why investment forecasting is futile
Investment gurus

Why investment forecasting is futile

Every year events prove that forecasting is futile and 2020 was no exception, says Bill Miller, chairman and chief investment officer of Miller Value …
18 Jan 2021
Why investors should beware of India’s surging stockmarket
Emerging markets

Why investors should beware of India’s surging stockmarket

The BSE Sensex benchmark index has soared by 90% since March, largely driven by foreign investors. But India's bull market is very vulnerable.
15 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Prepare for the end of the epic bubble in US stocks
US stockmarkets

Prepare for the end of the epic bubble in US stocks

US stocks are as expensive as they’ve ever been. How can you prepare your portfolio for a bubble bursting?
18 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021