Vodafone UK is planning to close a £ 755 million final salary pension scheme to almost 4,000 employees as it aims to save costs. It has now sent a letter to its employees informing them of such plans.

With such a move, Vodafone is cutting its cost incurred on retirement benefits. The logic is that low interest rates have inflated liabilities, while rising life expectancy has increased costs.

Vodafone will now improve the defined contribution pension programme. "This will result in pension benefits that are fair to all employees, sustainable in the long term and affordable for employees and the company," said the company.

The move would hit the company’s young employees as they stand to earn less pension now as opposed to earlier pension plans.

According to the company's latest annual report and accounts as of March 31, the assets of Vodafone's defined benefit scheme had a £60m shortfall compared with its liabilities of £815m.