Morrisons
is planning to close its two salary-linked pension schemes in a move
affecting about 8,000 workers at the ailing supermarket chain.
Letters consulting staff on the change, which could save Morrisons between £5m and £10m a year, were sent out on Friday, just weeks after rival Tesco announced it would be closing its own defined-benefit scheme.
Both businesses are trying to save money to invest in cutting prices and improving service and products, in an attempt to fight off fierce competition from the rapidly growing discounters such as Aldi and Lidl.
Retailers and other businesses are also cutting retirement benefits for employees as pension costs rise, partly because people are living longer. Even the John Lewis Partnership, which is owned by its employees, is consulting on ditching its final salary pension scheme and is expected to reveal its plans imminently.
Morrisons closed its two defined-benefit schemes, one of which caters to former Safeway staff, to new members more than five years ago. The latest move will prevent those already on the two schemes making any further contributions to them. Benefits already built up will be unaffected, but employees will have to move to Morrisons’ “cash balance” scheme, which newer staff have been on for the past three years, for any future accrual. The newer scheme, called the Retirement Saver Plan, is a form of defined-benefit scheme that promises a certain pension pot but does not guarantee the income it will produce in retirement.
Emily Lawson, human resources director for Morrisons, said: “This proposal is intended to provide fairer pensions benefits to all colleagues, ensuring that those doing the same role primarily have access to the same benefits.
“These are only proposals at this stage. Before any final decisions are made we will be entering into a consultation process with affected colleagues and their representatives.”
Morrisons’ pension liabilities amount to £805m according to the latest report and accounts, but the scheme has a surplus of £12m, making it a rarity in being well-funded compared to many schemes which are under water.
Joanne McGuinness, national officer at shopworkers’ union Usdaw, said the change would be worrying for its members at Morrisons. She said: “There is a legal requirement for Morrisons to enter into a meaningful consultation with Usdaw regarding this change to pension provision and we are currently in the process of agreeing a timetable for discussions.”
John Ralfe, an independent pensions consultant, said most small and medium-sized companies had already closed their defined-benefit schemes ahead of changes to the tax rules in 2016 which will make the schemes less attractive to employers. “There will be lots more big companies doing this over the course of the next 18 months,” Ralfe said.
Letters consulting staff on the change, which could save Morrisons between £5m and £10m a year, were sent out on Friday, just weeks after rival Tesco announced it would be closing its own defined-benefit scheme.
Both businesses are trying to save money to invest in cutting prices and improving service and products, in an attempt to fight off fierce competition from the rapidly growing discounters such as Aldi and Lidl.
Retailers and other businesses are also cutting retirement benefits for employees as pension costs rise, partly because people are living longer. Even the John Lewis Partnership, which is owned by its employees, is consulting on ditching its final salary pension scheme and is expected to reveal its plans imminently.
Morrisons closed its two defined-benefit schemes, one of which caters to former Safeway staff, to new members more than five years ago. The latest move will prevent those already on the two schemes making any further contributions to them. Benefits already built up will be unaffected, but employees will have to move to Morrisons’ “cash balance” scheme, which newer staff have been on for the past three years, for any future accrual. The newer scheme, called the Retirement Saver Plan, is a form of defined-benefit scheme that promises a certain pension pot but does not guarantee the income it will produce in retirement.
Emily Lawson, human resources director for Morrisons, said: “This proposal is intended to provide fairer pensions benefits to all colleagues, ensuring that those doing the same role primarily have access to the same benefits.
“These are only proposals at this stage. Before any final decisions are made we will be entering into a consultation process with affected colleagues and their representatives.”
Morrisons’ pension liabilities amount to £805m according to the latest report and accounts, but the scheme has a surplus of £12m, making it a rarity in being well-funded compared to many schemes which are under water.
Joanne McGuinness, national officer at shopworkers’ union Usdaw, said the change would be worrying for its members at Morrisons. She said: “There is a legal requirement for Morrisons to enter into a meaningful consultation with Usdaw regarding this change to pension provision and we are currently in the process of agreeing a timetable for discussions.”
John Ralfe, an independent pensions consultant, said most small and medium-sized companies had already closed their defined-benefit schemes ahead of changes to the tax rules in 2016 which will make the schemes less attractive to employers. “There will be lots more big companies doing this over the course of the next 18 months,” Ralfe said.
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