UK - Supermarket giant Sainsbury's has told its 32,000 scheme members that they must dramatically increase their contribution rates to stay in the final salary plan.
Those who do not accept the mandatory 64% increase in contribution rates will be axed from the DB plan and offered a new career average plan in its place.
In a letter to members of the £2bn J. Sainsbury Pension & Death Benefits Scheme, chief executive Sir Peter Davies said the ultimatum was necessary to cover falling asset values and increased longevity within the membership.
Under the mandatory increase members will have to raise contributions from 4.25% to 7% after March 28.
Sainsbury’s has already raised its employer contributions from 8.5% to 14.2% this year to tackle the scheme’s estimated £1.1bn deficit.
Davies added that the future health of the final salary scheme will depend on market movements and refused to rule out further employee and employer contribution increases.
In the letter to scheme members, Davies said: “We believe that these actions will go a long way to reducing our funding deficit and are in the best interest of both our colleagues and shareholders.
“This is an issue affecting most companies, and one which our investors and regulators expect us to address as soon as possible.”
However, the GMB general union condemned the move and said that it will result in retirement poverty for Sainsbury’s employees.
General secretary John Edmunds said: “This shows that closing the final salary scheme to new members is only the first step on a slippery slope to closing it to everyone.
“Hardworking people, who have contributed to the scheme throughout the years, now face pension poverty through no fault of their own.”
Separately, the Sainsbury’s scheme is to make contact with 27,000 “missing” scheme members who are entitled to approximately £800,000 in benefits.
Sainsbury’s is tracing former scheme members who accrued benefits between 1977 and 2000, having either left the company without filling in the required documentation or moving home without informing the scheme.
Pensions manager Geof Pearson said that the scheme has managed to return a “significant chunk” of the £800,000 that was lost to members, after becoming the first scheme to join the Unclaimed Assets Register 12 months ago.
Pearson added: “We are entitled to write off these amounts – lots of schemes have probably done this - but what we are saying is ‘no, somebody’s paid into the scheme, it’s theirs and we are not going to write this off.’”
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