Morrisons moves from final-salary to career-average pension

Morrisons, one of the UK’s largest supermarket chains, has amended its final-salary pension schemes and moved the 11,000 active members to a career-average revalued earnings (CARE) basis for future accrual. Benefits will be revalued in line with inflation.

The company describes this as the final step in a process that aims to put its two defined-benefit (DB) arrangements, which are already closed to new entrants, on a "sound financial footing for the long term". The company expects scheme liabilities to be cut by £90 million.

Prior to moving to a CARE basis, the Bradford-based supermarket chain injected £200 million into its DB schemes, the Wm Morrison 1967 Pension Scheme and the Safeway Pension Scheme, which already had a CARE section. In consultation with the trustees, the company has also now reduced the funds’ exposure to equity investments, and put the actuarial valuation - particularly mortality rates - on a "very prudent basis of assumptions".

Reduced risk

Morrisons says: "The move to CARE is one of a number of measures that have been agreed with the trustee that are designed to reduce financial risks and volatility for the company, improve the financial security of the schemes and still provide the active members with a pension based on their salary."

Members were advised of the proposed changes at the start of the consultation period in February 2009. Having considered employee feedback, Morrisons says that it will now inform members that the proposed changes will be implemented from October 2009. Once the changes are in force, the company says that the 27,000 deferred members of the schemes will benefit from improved commutation factors if they choose to take the tax-free cash option when they draw their pension.

Morrisons has offered a stakeholder pension scheme to new employees since June 2001 and it matches member contributions of up to 5%.