UK retail chain Tesco is to launch a new pension scheme that is somewhat of a hybrid between defined benefit and defined contribution.
The self-administered ‘Pension Builder’ will be launched on Friday 6 April and will stand in place of a stakeholder scheme as part of the existing final salary provision for its 200,000 UK mainly part-time staff.
According to Tesco, this is the first time a defined benefit (DB) scheme has been made available to part-time and temporary staff.
Graham Snell, a partner at consultancy firm Watson Wyatt - which advised Tesco on the new scheme - described the scheme as “very much DB”, although he added that “in terms of sharing the risk and financing, it does fall between final salary and money purchase. I think there is still more risk with the employer than with the employees. But crucially Tesco did not want to expose their employees to the risks of money purchase.”
I think the flexibility with being able to deal with any earnings and any fluctuation of earnings is unique. Historically flexibility in the workforce has been one of the barriers to getting the part-timers, who are the majority of the workforce, into a DB scheme.”
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