Stevedoring Services will freeze one of its pension plans as it tightens its belts during the economic crisis.

The cargo management company will pay out $3 million by honouring its deficits to staff in the defined benefit pension plan, which will be wound down in early June.

It says the move was suggested by consultants because of the large financial burden of that pension plan.

The firm had introduced a less financially crippling defined contribution plan some years ago, but some workers had opted to stay in the defined benefit pension plan.

People who have already retired will not be affected.

The announcement comes a day after Stevedoring and Bermuda Industrial Union settled on a four percent pay rise for dock workers, following a row which led to a work-to-rule period.

Stevedoring financial controller Ian Brunson told The Royal Gazette: "It's just a matter of the deficit. It's quite substantial for every company that has a defined benefit pension plan.

"Defined pension plans in general are not what most companies are promoting. They have a huge obligation on any company. Just with how things are going in the economy we thought this was the right thing to do. "The staff have taken it quite well — the company is fully committed to funding the deficit and protecting the participants. The company will make sure they get a dollar for a dollar."

Stevedoring said in a press release that a review was carried out by independent pension consultants, while the firm has also held talks with legal advisers and the Pension Commission.

"The purpose of the decision was to cap the growth in the unfunded pension liability as reported in the notes to the annual financial statements," said the statement.

Mr. Brunson added that the recommendation from the consultants was made earlier in the year, but could not be acted upon until the quarterly board meeting this week.

Earlier this month, dock workers went on work-to-rule when Stevedoring refused to meet BIU's demand for an eight percent pay increase.

It resulted in 22 containers being returned to the US without being unloaded in Bermuda; supermarkets complained about waiting longer than usual for food; while the construction industry was left without key materials and equipment from overseas.

The union's demand then came down to six percent, before both sides finally agreed on a four percent rise.