Department store chain John Lewis is scrapping its final salary pension scheme and replacing it with a defined contribution hybrid scheme that is linked to their final salary as well as their overall contributions following a review.
The retailer said the new scheme, which has been agreed by the partnership board and the chairman, will take effect for new employees from April 2015 and for existing employees from April 2016.
The new scheme will continue to offer a non-contributory defined benefit scheme based on an employee's final salary, but at a reduced accrual rate of 1/120th for future service from April 2016.
The defined contribution part of the scheme, in which employee contributions are matched by the partnership up to 4.5 percent contractual basic pay, will be extended from three years to the full length of an employee’s service. Staff who are members of the Partnership Defined Benefit scheme will also receive 3 percent of their contractual basic pay each month on a non-contributory basis toward their defined contribution pension.
In addition, the review has also increased the length of time an employee must wait before joining the defined benefit part of the scheme from three years to five years from April 2015.
Nat Wakely, director of the pensions benefit review, 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.
“The Council's unanimous vote in favour of the final proposal was the culmination of 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.”