Jet engine maker Rolls-Royce has blamed growing deficits for a decision to close all its final salary pension schemes to new members.
RR yesterday pledged to pump #500 million into its three UK pension funds as part of measures aimed at plugging a deficit of around #1.28 billion.
The company, which employs 11,000 people at Derby, also offered to increase future contributions but wants workers to agree to close two r emaining final salary schemes to new members.
The group had already stopped new members from entering its main pension scheme, which has 72,000 members, in 1999.
Rolls-Royce started discussions with representatives of the three funds this week - three years after it agreed to pump #567 million into its main scheme, the Rolls-Royce Pension Fund.
In line with other blue-chip companies, the state of Rolls- Royce's pension funds have been hit by weaker investment returns and increased life expectancy.
It said yesterday's proposals addressed the shortfall and offered "secure, competitive and affordable pension arrangements for the group and all its members".
A spokesman said rises in the liabilities of the schemes on the back of falling interest rates had more than offset a strong performance in equity markets.
"It's not a good environment in which to manage the business when you have such great volatility attached to a large liability," the spokesman said.
"We have started discussions to propose a way of eliminating the deficit altogether in the medium term at the same time as changing our arrangements to prevent the volatility reoccurring."
The spokesman added: "We increased funding three years ago and put #100 million in last year, but the deficit still grew, so this is not really a situation where we can keep putting money in."
RR said it will make a lump sum contribution of #500 million across the three schemes and increase the level of future contributions.
The payments will depend primarily on members accepting the closure of the two final salary pensions schemes to new members - the Rolls- Royce Group Pension Scheme and the Vickers Group Pension Scheme.
Many companies have already switched new members from final salary schemes into less generous defined contribution ones.
Under final salary schemes workers receive a proportion of the salary they are paid immediately before they retire for every year they have been a member of the scheme.
But under defined contribution schemes companies only guarantee how much they will pay into a worker's pension and not what it will be worth when they retire, leaving them having to shoulder investment risk and buy an annuity when they stop working.
Rolls-Royce also said it wanted backing for a change of investment strategy to achieve a better match between assets and liabilities.
The company recently said pretax profits jumped 49 per cent on a like-for-like basis to #584 million in 2005, following continued strong growth in its after-sales services arm. Its shares have been among the best performing in the FTSE 100 Index.
At the same time as announcing its results in February, RR said it was looking at ways to tackle the pension deficit, which rose 15 per cent last year.
Works convenor at the group's Derby factories, Steve Wright, said unions were planning to consult pension experts on the proposed changes.
It is too early to say whether unions would consider taking industrial action, Mr Wright said. "When we have taken expert advice, we'll have had time to gain our members' views and decide where we're going," he said.