The move, which is being funded by a major company debt restructuring, will ensure that all 23,000 existing members of the company's final-salary and career-average pension schemes, which were shut to new members in 2002, will be allowed to continue accruing their generous pensions.
Members who are still active employees of the supermarket will have to increase their contributions by 3 per cent each month if they wish to maintain the same level of benefit as they are currently expecting.
Employees in the final salary scheme who do not want to increase their contributions will be moved into the career-average scheme, while members in the career-average scheme who do not want to pay anymore, will be moved into the company's "cash balance scheme", into which new employees are enrolled.
The cash balance scheme is an index-linked scheme, which is guaranteed not to fall in value, and into which Sainsbury's contributes 9.75 per cent of salary, and employees contribute 4.25 per cent. The funding of the pension deficit has been primarily financed via a restructuring of debt facilities, which will see its £1.7bn unsecured corporate bond issue replaced by a £2.07bn loan secured against about half of the premises for which the company owns the freehold or a long lease.
Sainsbury's, headed by its chief executive, Justin King, said the refinancing will save it £12m a year in debt repayments, all of which will go towards increased payments into the pension scheme. The company will raise its annual payments into the scheme by £18m to £38m a year.
As well as being cheaper, the group said its new debt facility provides it with more flexibility.
The new £2.07bn loan is secured against 127 supermarkets worth £3.55bn, giving the company the option of extending its debt if it needs to.
Sainsbury's pension fund trustees and unions welcomed yesterday's news, saying they believed it was fair on both parties.
Since the start of the year at least half a dozen major UK companies have made major changes to their pension schemes, to the detriment to employees.Reuse content