Asda becomes the latest firm to axe its final salary pension
Saturday 09 October 2010
The UK's second biggest supermarket, Asda, is to close its final-salary pension scheme after the scheme's deficit almost doubled to £400m in the past nine months alone.
The Walmart-owned grocer, which closed the scheme to new members five years ago, said the move will affect 3,800 staff, who are in managerial or administrative roles.
In axing its final-salary scheme, Asda joins a long list of companies including the retailers Morrisons and Alliance Boots, as well as the phone giant Vodafone and the bank Barclays, that have done the same to reduce their pension liabilities.
The decision by Asda comes in the week that Sir Terry Leahy, chief executive of Tesco, said the UK's biggest supermarket remained committed to its final salary scheme.
Two days ago, Lord Hutton, the former Labour minister, said that lucrative final-salary schemes for public-sector workers must end to alleviate the burden on the UK finances.
An Asda spokesman said: "We're no different to other major companies who are looking for ways to address the uncertainty that legacy final-salary schemes create for business. We're by no means the first, we certainly won't be the last."
The grocer said its pension deficit had rocketed from £210m to £400m since January. In addition to tackling the bulging deficit, Asda said it would protect the accrued benefits of the 3,826 members moving off the final-salary scheme. The supermarket described as "generous" its decision to give a cash sum equal to 25 per cent of salary for the affected members which they can take as cash or put into their new scheme.
The final salary scheme will be closed from early next year.
The spokesman said: "Addressing the uncertainty at a time of strength allows us to be generous when compensating the 4,000 colleagues in the scheme."
Asda said it was making improvements to the replacement scheme that will "benefit all colleagues, not just those in the final salary scheme", including increasing life assurance payments from 4 times to 5 times salary and enhancements to ill-health benefits.
On Tuesday, Sir Terry said that Tesco would not ditch its pension scheme, which is based on a career-average retirement plan. He said: "It's a great savings vehicle for the future which helps us recruit and retain the best people. I thinkpeople will look back and say it's a big error to have let these schemes go by the wayside."
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