John Lewis Partnership is planning to revise its final salary pension scheme to cut costs and help reduce the fund's deficit. The retail group is considering barring new entrants from joining the scheme until they have worked for the partnership for two years. This is when staff turnover is at its highest.
The company has set up a special committee to look at the final salary scheme and make recommendations on it. It is due to report in September with a formal proposal to be made in November.
John Lewis' pension fund currently has a deficit of £68m. The pension fund has 40,000 members with another 18,300 deferred members, who have left the group but will qualify for pension entitlements. The fund is currently supporting 14,148 pensioners.
John Lewis has been moving more of its pension fund's £1bn assets into bonds in response to falling equity prices. The target is to push the bond proportion from 10 per cent to 12.5 per cent.
The pension fund, which is non-contributory, accounts for 10 per cent of John Lewis' total payroll costs.
It would be highly unlikely that John Lewis would follow companies such as Dixons, Iceland, Marks & Spencer and Ernst & Young and axe its final salary scheme to new members altogether. It is one of Britain's most paternal employers and the company is owned by its staff via a trust set up by the group's founder.
At a recent John Lewis council meeting, Dudley Cloake, the group's personnel director, said: "The final salary scheme is a real advantage where recruitment and retention are concerned, and from the management side I can see no reason to move away from it."
The cost of final salary schemes has escalated following falling equity prices while the deficits in funds are more obvious after the introduction of the new FRS17 accounting regulation.
In March John Lewis reported a fall in profits for the fourth year running. Profits fell 5 per cent to £141m due to e-commerce investments and a poor second half after the 11 September attacks.
The TUC has criticised companies who have made the change for transferring the risk of providing a retirement income from the company to the employee. Earlier this month it accused employers of using FRS17 as an excuse for cutting pay.
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