At the same time the union’s lawyers are scouring contracts of employment at Rentokil ahead of possible legal action against the halting of that company’s final salary scheme.

The moves come as unions gear up for increased action against pension changes, fearing a domino effect of benefits reductions after the moves by several big employers.

The GMB is angry that the Co-op pension scheme covering retail and funeral staff, which is 109 per cent funded, is to be merged with the 77 per cent funded scheme for bank staff and the 95 per cent funded scheme for insurance staff.

Phil Davies, the GMB’s national officer, said: “Not only will the new scheme reduce our members’ pension benefits, but the merger of the older final- salary schemes will massively disadvantage our members.

“The group scheme, worth £2.4 billion, is in surplus under any measure. The proposal, in effect, is to use this surplus to bail out the other two schemes, which provide pensions to the better-paid employees elsewhere in the organisation.”

The T&G union, which represents drivers in the Co-op’s transport and distribution system, has also said it expects calls for industrial action over the pension changes.

However, in a divide between the main unions, Amicus is recommending that its members, many of whom work in the banking and financial divisions, accept the new proposals. Derek Simpson, Amicus general secretary, said: “We’re disappointed that the company has chosen to move to a scheme which will result in lesser pensions for our members and failed to respond to recommendations made by the trade unions as to how the scheme could have been improved on.

“Nevertheless, the company are at least retaining a pension scheme which provides better value than other alternatives and we’re recommending that our members remain within the scheme.”

Brendan Barber, General Secretary of the TUC, cautioned that unions would try to defend existing pension schemes. He said: "The death of salaryrelated pensions is much exaggerated, and unions have a proud record in defending and extending pension rights. We stand ready to resist pension cuts in companies that can afford to fund deficits, have taken extended contributions holidays or expect everyone other than directors to tighten their belts. A pension cut is a pay cut, and our members expect us to defend their pay.”

Meanwhile, talks continue between unions, local government employers and the Government over the local government pension scheme. Unions are resisting attempts to lift the retirement age from 60 to 65.

Pensions deficits of top 350 firms rise to £93 billion

PENSION scheme deficits among FTSE 350 companies increased nearly a quarter last year to £93 billion, despite the bounce in equity markets, research by Mercer Human Resource Consulting shows.

The figures, from disclosures for year-ends to April 30 last year and from forecasts given up to the end of last year, revealed that pension asset values in the top 350 companies rose about £60 billion to £422 billion. However, scheme liabilities also grew and increased the total deficit.

Tim Keogh, a partner at Mercer, said: “Favourable investment performance did little to dilute the value of pension scheme deficits in 2005. Bond markets rose at the same time as equity markets, causing yields to drop and liabilities to grow.”

The FTSE 350 companies account for about half of UK occupational pension schemes in terms of fund assets. It is thought the companies contributed about £5 billion to reduce their pension deficits last year, the same level as 2004.

Mr Keogh said: “Our experience suggests that many companies have waited to find out the cost of their Pension Protection Fund levy and the strength of the new funding regulations before they revise their contribution plans. Despite some companies making substantial contributions in 2005 . . . we have yet to see the change in contribution strategy the Pensions Regulator is probably hoping for.”

Times Recommends

• Minister in talks with Saudis to protect creditors
• Premier Inn hits back in £29-a-room row
• Bankers hit back at 'populist' bonus supertax