Morrisons joins cull of final-salary pensions

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The Independent Online

The Bradford-based grocer Morrisons has become the latest company to axe its final-salary pension scheme for existing members.

The ditching of the scheme came as Morrisons posted better-than-expected underlying sales, up by 7.3 per cent, excluding fuel, for the 13 weeks to 3 May, driven by storming sales in the South, London and Scotland.

From July, Morrisons will move its final-salary pension scheme's 4,500 existing members – who still work at the grocer – into one based on the average they earn over their career. Morrisons shut its final-salary scheme to new members in 2003. The change will result in a credit of about £70m on its income statement at the interim stage.

The move by Morrisons came a day after the bank Barclays said it was ditching its final-salary pension scheme for 18,000 of its staff. On Monday, the oil giant BP revealed it was closing the door on its scheme to new members. The UK's fourth-biggest grocer has previously injected £200m into its final-salary schemes and reduced the funds' exposure to equity investments. "The final step was to move all future benefit accrual on to a career average basis, such that it will grow in line with inflation rather than being linked to final salary," Morrisons said.

Over its first-quarter, Morrisons posted total sales, excluding fuel, up by 8.2 per cent, as 1 million customers visited its stores each week. Marc Bolland, the chief executive of Morrisons, said: "We continue to do particularly well in the non-traditional Morrisons areas, such as London, the South and Scotland." More specifically, he said that some of its smaller stores in southern England had delivered sales up by 13 per cent over the past year, bringing their sales growth over the past two years to 25 per cent, as they attract and keep new customers.

Mr Bolland also said Morrisons was grabbing sales from its supermarket rivals and from the so-called "premium" grocers, Waitrose and Marks & Spencer. For the 12 weeks to 17 May, Morrisons' sales grew by 7.9 per cent – ahead of Sainsbury's 7.8 per cent, Asda's 7.2 per cent and Tesco's 4.7 per cent, according to TNS Worldpanel.

Mr Bolland said Morrisons had delivered strong sales across its product offer, citing buoyant sales of premium ranges and fresh foods, to which it added more than 500 new products.

Darren Shirley, an analyst at Shore Capital, said given that Morrisons said that food inflation had eased in the first quarter, after peaking in the fourth quarter, it must have delivered "a compensatory uplift in volumes".

Morrisons was also boosted by Moody's, the ratings agency, upgrading its credit rating for the second successive year to triple-A, the top corporate rating for creditworthiness. Richard Pennycook, the finance director of Morrisons, said the grocer was one of only three retailers globally with an A3 rating, alongside the world's biggest retailer, Wal-Mart, and the French giant Carrefour. Last week, Moody's changed the outlook on Tesco's A3 rating to negative from stable, citing concerns over its high level of leverage.