UK - The £2.7bn J. Sainsbury Pension Scheme - the self-proclaimed "beacon" for Myners - is set to close its defined benefit scheme for new entrants in January 2002.
The scheme plans to introduce a stakeholder scheme in April next year which will be run by Legal & General Investment Management.
L&G was chosen from a shortlist of five which also included Standard Life, Prudential, Friends Provident and Norwich Union.
Members belonging to the existing group personal pension plan, which is also managed by L&G, will migrate to the new stakeholder. Contributions will be backdated in the interim months of February and March.
Sainsbury said closing its DB plan to new members would reduce the scheme’s risk profile and costs.
Pensions manager Geof Pearson said: “We are not welching on our defined benefit promise. For those who have been in the GPP for five years – which includes 50,000 members – they will continue under the DB scheme beyond 2002.”
The defined benefit closure at the so-called model scheme is certain to spark fears that it will set an example to the industry that final salary provision is increasingly unaffordable.
But Pearson defended the decision and said: “Myners is nothing to do with defined contribution or defined benefits.”
He said members would benefit from the contracting in of the stakeholder scheme, which will offer 3%-5% employer contributions.
In a separate move the scheme reiterated that it is searching for a manager to invest up to 5% of the fund – approximately £150m – in alternative investments.
The review of its investment strategy will also include increasing bond allocation by 10 percentage points.
Pearson said the increased bond weighting in corporates – from an 80-20 equity/bond split to 70-30 – was not simply due to the increase of deferred pensioners.
And Pearson added: “We were not necessarily influenced by the recent decision by Boots to switch wholesale to bonds.”
Pearson said the timing of both the alternative asset and bond investment hinged on the sale of Sainsbury’s Homebase and Accenture divisions, which will raise cash for the purchase, and the subsequent transfer of member policies.
The scheme added that is has increased its commutation factors, currently just 1%, in a bid to encourage members to work beyond the age of 65.
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