With its 3.1% rise in sales over the festive period, and its consequent cementing in the key Christmas trading period, you may have been thinking all is rosy at upmarket grocer Waitrose.
Yet beneath the record sales is a record pension deficit currently totalling GBP 840 million.
Revealed after an investigation in March 2013, the company now has to dismantle its pension scheme – once alternatively named the “UK’s last generous pension scheme” and “Britain’s last golden pension.”
The Proposals
The John Lewis Partnership, which owns both Waitrose and John Lewis, has already agreed to a ten-year plan which will aim to reduce the benefit and a one-off payment of GBP 85 million.
JLP is also drawing up proposals to help counter the debt, including the formation of a less costly ‘hybrid scheme’ which combines elements from defined benefit and defined contrition pensions.
This will consequently still retain some of the perks of a final salary pension (which links a person’s final salary to their pension) – making it one of a handful of UK companies still doing so – though JLP will increase the waiting period workers have to work before they can apply from three years to five.
In addition, the plans may:
- Tie the state pension age to the scheme’s retirement age.
- Use the consumer prices index to decide any increases in the pension.
- Affect existing and future employees.
In conclusion, whilst the pension is to remain a “defining element of our business,” the new scheme is intended to be “sustainable for the long term,” according to Nat Wakely, the Director of the pensions review.
Review
Any decisions to trim pension benefits promises to be highly political, as the supermarket is currently owned by its 80,000 employees.
Whilst John Lewis may intent to sweeten the deal with increased dividends for “defined contribution” scheme payments (where the worker is at risk if the investment portfolios fail), ultimately, the cost to plug the deficit will come from employee’s bonus payments – making the decision making process fraught.
Proposals to plug the deficit will be put forward in late 2014 and put to a vote.
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