Retail giant Marks & Spencer has told active members of its defined benefit scheme that they will no longer be able to accrue addtitional benefits from April 2017.
In a statement on Friday (2 September), the retailer said members would be offered the chance to join the company’s defined contribution plan instead.
As part of the deal, members would maintain a death-in-service benefit of four times their salary.
They would also receive a compensatory cash supplement for three years, rather than the two years initially proposed, the statement said.
The announcement was part of a pay and pensions consultation that resulted in shop assistants’ hourly wage increase by 14.7 per cent to £8.50, and £9.60 in London; but also the scrapping of Sunday premium payments.
M&S is one of 29 of the 100 companies in the FTSE 100 whose DB scheme is in surplus.
As of 31 March 2015, the scheme had a surplus of £204m, making it 102 per cent funded.
That compared with a FTSE 100 total deficit of £70bn, as recorded by JLT Employee Benefits at the end of December 2015.
David Brooks, technical director at pensions and employee benefits consultancy Broadstone, said the retailer’s decision to close the scheme to future accrual would be “a great disappointment” to those who want to see DB schemes stay open.
He said: “The pressure of depressed gilt yields on rising liability values means that it is understandable that Marks & Spencer wants to lock in the gains they’ve made in recent years, going from about £100m deficit to about £200m surplus and perhaps avoid the pressures on their business experienced by retail competitors such as BHS.”
Given the majority of company schemes had already closed to future accrual, Mr Brooks said it was “a slight surprise to discover that the shop assistants who sell pants to the generation that has generously reaped the rewards of final salary pension schemes were still enjoying such benefits themselves”.
He said members of the DB scheme should be “heartened” that they will still have a “precious benefit”.
He urged members not to become “prey to fraudsters and scammers looking to encourage them to transfer their benefits elsewhere”.