The John Lewis partnership has ditched its final salary pension scheme in favour of a hybrid scheme partly based on staff contributions.
The department store group and owner of Waitrose said that from April next year it would also increase the period staff must wait before they can join the replacement scheme, from three years to five.
After joining, staff will be assured payments of 120th of their final salary for every year worked without having to make any contribution.
The company will put in contributions worth 3% of basic pay for those on the salary-linked scheme. It will also match staff contributions of up to 4.5% for all workers, including those who have been on staff less than five years.
In another money-saving move, new staff joining the pension scheme from next year will also retire at the state pension age, which is to rise to 66 in 2020, 67 in 2028 and further after that.
Until now John Lewis has been one of only a handful of businesses still offering a final salary pension. Businesses are trying to reduce costs as people live longer. Last week Morrisons said it planned to close its two defined benefit pension schemes just weeks after Tesco announced it would be closing its defined scheme to save money.
Nat Wakely, director of the pensions benefit review at the company said: “The John Lewis partnership pension is a defining element of our business and this decision will ensure that it remains so in a way that is fair and affordable.”
He said a staff representative council had voted unanimously in favour of the new scheme after “a very thorough process, involving every area of the partnership and concluding in a decision that we took together in an open and democratic way.”
John Lewis launched a review of its pension scheme in March 2013 after a valuation found it had a deficit of £840m. The company, which is owned by its employees, agreed to make a payment of £85m into the scheme last year on top of annual contributions of £44m a year under a 10-year plan to eliminate the deficit. A spokesman for the company said the changes would not save money in the short term but would reduce the risk of rapidly rising costs in future.
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