Retailer John Lewis Partnership has announced it is closing the defined benefit section of its pension scheme.

The company currently operates a hybrid pension scheme, made up of a defined contribution and DB section, which are available depending on length of service, but this will close in April 2020. Instead, employees will have access to an “improved” DC scheme.

The decision to end the partnership’s DB offering was made following a year-long review and consultation with employees. The John Lewis Partnership Council, a body made up of 58 democratically elected representatives, voted for the changes to the scheme.

“Partner feedback was essential in shaping the pension proposal, with over 10,000 partners sharing their views over the last six months. The decision to make the changes was approved this afternoon (15 May) by the John Lewis Partnership Council,” it said in a statement.

Following the changes, all 83,900 employees will be offered a DC scheme with matching contributions of up to 8 per cent of pay and an additional 4 per cent after three years’ service, regardless of whether they pay into the scheme or not. It will also mean a more equal distribution of profits among employees, the company said.

“The new pension scheme structure is designed to be more affordable, supporting the partnership’s strategy of improving its long-term financial sustainability, saving approximately £80m in annual pension costs,” a company statement said.

In its most recent annual report, the retailer revealed that the scheme’s actuarial valuation as at 31 March 2016, found a funding deficit of £479m. It had assets of £4,377m. As a result of the valuation, the company’s contribution rate decreased from 16.4 per cent to 10.4 per cent of eligible monthly payroll.

It also agreed deficit reduction contributions for the period 1 April 2016 to 31 march 2019, of £33m to be paid in equal monthly instalments, increasing by 3 per cent at 31 March 2017, and 31 March 2018. And deficit reduction contributions from 1 April 2019 to 31 March 2026 of £6.6m per annum, to be paid in equal monthly instalments, increasing on 31 march each year by 3 per cent.

It also made one off payments of £100m paid on 31 January 2017 and 31 March 2017.

Share Story: