CAR manufacturer Nissan last night announced it is to close its final salary pension scheme to newcomers later this year.

The company has looked at ways to plug a £121m shortfall in its pension fund to ensure workers receive their entitlement when they retire.

It plans to inject £30m during the next five years and will make up the rest through increased contributions, both by itself and scheme members.

The firm pays 12 per cent for every four per cent put in by its staff. It will raise that to 13 per cent next year, 14 per cent the year after, and up to a maximum of 16 per cent the following year.

Employees will also be asked to help return the fund to full solvency by increasing payments by one per cent next year, another one per cent the year after that and a further quarter per cent in 2006.

Staff will still be able to retire at 60 as of right, but in future can choose to stay on until 62 and increase their years of service. They will also retain the option to retire before 60 with the permission of the company.

A six-month consultation exercise will be held with the Nissan company council before any decision is finalised.

A range of options are being offered, including the opportunity to opt for a new defined contributions scheme that will also be offered to new starters from September.

It is unlikely that existing members will vote for a new contributions scheme as other companies which have closed their final salary pension schemes have generally decided on less well-paying alternatives.

Nissan will set up a pensions surgery for its Sunderland staff - who form the majority of the scheme's membership - and the company council will be using its own independent financial advisors.

Nissan employs about 5,500 staff in the UK in its manufacturing, research and development, design and sales operations.