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Latest NewsPay & benefitsPensions

Sainsbury’s tells employees: respond to changes in occupational pensions scheme or lose out

by dan thomas 17 May 2006
by dan thomas 17 May 2006


Sainsbury’s is making a series of changes to its occupational pension scheme as it attempts to cut its liabilities.



Employees in the supermarket chain’s career average plan – who make up about two-thirds of its pension scheme – are being asked to increase contributions from 4.25% to 7%.



Those that do not choose this option will be automatically switched to a ‘cash balance’ pension.



Under the cash balance scheme employees aged 60 could lose two-thirds of their benefits, while 45-year-olds could lose three-quarters of their pension, according to pensions consultant John Ralfe. This pension would cost Sainsbury’s about half as much as the career average plan, he said.



The move is effectively the opposite of the Pensions Commission’s proposal that all employees are automatically enrolled to occupational pensions, unless they opt out.



It follows a similar move in 2004, when Sainsbury’s introduced the career average scheme. About one-third of staff on the final salary scheme did not respond and were automatically switched, Ralfe said.



Some 8,000 members of Sainsbury’s 23,500-person pension plan have a final salary scheme. They are being asked to increase contributions from 7%to 10%, or move to the career average section, with annual benefit increases linked to inflation not salaries.



Sainsbury’s has asked for a decision from its employees by September but said it had to create a default for those members that did not respond in time.



A spokesman for the company said: “We don’t have the authority to take extra money from their pay packets.”



Expert slams Sainsbury’s switch on defined benefit pensions



 


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