UK - The John Lewis Partnership is to improve its pensions offering by reducing the waiting period for staff to join the final salary scheme and introduce a new defined contribution scheme for new employees.
At a time when many other corporates are considering whether it can keep their final salary schemes open, members voted "overwhelmingly" at the firm's two-day Partnership Council to maintain the £1.86bn (€2.35bn) final salary scheme - with an accrual rate of 1/60 of final salary - and to cut the waiting time to join the plan from five years to three years.
In addition, the Partnership - which owns the high street retailers John Lewis and Waitrose - agreed to introduce a new defined contribution (DC) scheme, which new members of staff can contribute to until they become eligible for the non-contributory final salary scheme.
The Partnership claims the new DC scheme would allow an extra 30,000 staff members, out of a total of almost 70,000, to join the pension scheme, with the organisation confirming it will match employee contributions of up to 6% of pensionable pay - which is at least 3.6% of basic pay.
Improvements to the scheme are expected to cost the firm an extra £9m a year on top of existing pension costs - which were £83.2m for 2007/08 - however the Partnership also took action against the risks of increasing longevity on scheme liabilities by introducing the use of a Life Expectancy Adjustment Factor (LEAF).
It said LEAF would apply to pensionable service going forward, and is intended to "mitigate against unquantified risk to the pension scheme as a result of people living longer".
The changes - expected to come into effect from October 1, 2008 - are a result of the findings of a special committee established by the firm in 2007 to examine the future of the pension fund, as it is believed a five-year waiting period was seen by some within the company as too long to wait, considering the growing number of new staff entering the retail sector.
The committee's recommendations were then put forward for approval by the Partnership Council - one of the firm's three governing authorities, which has the responsibility of deciding matters relating to profit.
Figures from the Partnership's annual report for the year ending January 31, 2008 showed scheme assets increased from £1.81bn to £1.86bn, however liabilities, valued on an IAS19 basis, were £2.41bn creating a deficit of £554m - 26%, or £113m, higher than the previous year.
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