The John Lewis Partnership is considering major changes to its generous pension schemes to help eliminate a growing pension deficit.
The proposed changes will mean that workers at Waitrose and John Lewis will receive less in retirement.
Under the plans, the partnership will keep its final salary scheme, which guarantees a certain level of income in retirement, but workers will be transferred onto the scheme only after they have done five years of service. Currently, workers have to wait only three years.
Workers will also build up pension benefits under the scheme at a reduced rate and age.
The age at which workers can start to claim their pension will be linked to future increases in the state pension age and to limit pension increases in retirement John Lewis will base annual increase on the CPI measure of inflation, capped at 2.5%. Currently, increases are linked to the RPI measure of inflation – which is normally always higher than CPI.
At the same time, the Partnership will extend its defined contribution scheme, which pays money into a pot that workers draw on in retirement rather than guaranteeing an income. To make up for some of the other changes, workers will continue on the scheme once they have joined the final salary scheme, whereas previously the scheme ended when the final salary one began.
John Lewis said the changes would help it eliminate its pension deficit, which was £840m as of March 2013. It said the deficit had arisen because of the impact of low interest rates on its liabilities.
Under a 10-year plan to eliminate the deficit, John Lewis will pay in £44m a year. It is also making an £85m one-off payment this month.
“The John Lewis Partnership pension is a defining element of our business,” said Nat Wakely, director of the pensions benefit review. “We are determined that it should remain so while ensuring that the scheme is sustainable for the long term.”
The proposals will be voted on towards the end of 2014.
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