Safeway raises pension contributions

UK – Retailer Safeway, facing a 217 million pound (315 million euro) pension deficit, is to increase the contributions it makes into its final salary pension scheme to 15% of salary, from nine percent currently.

Staff contributions will rise by one percent to six percent of salary, from June 22.

“If financial market conditions do not improve by April 2004 then member contributions to the final salary section of the Scheme will increase by a further one percent of salary,” the company said in a statement.

The extra contributions would cost 15 million pounds a year. “The Safeway Scheme remains strongly cash positive with income (i.e. dividends, interest and company and member contributions) significantly exceeding outgoings (mainly benefit payments and costs of administration).”

The company closed its final salary scheme to new members in May last year, replacing it with a career average defined benefit plan for new members.

It said that as at March 29 this year the scheme had a deficit under the FRS17 reporting standard of around 217 million pounds, which corresponds to a funding level of 77%.

In April 2001, the scheme was 201 million pounds in surplus, representing a 128% level.

It attributed the decline to “significant further deterioration in the value of equities” and a fall in real gilt yields.

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