Tesco claims its pension scheme will still be more generous than many others under changes proposed this week - that experts predict will wipe up to 20% off payouts.
The retailer announced plans to switch the inflation index it uses to calculate annual payments from the retail prices index (RPI) to the consumer prices index (CPI), which excludes mortgage payments, council tax and house price depreciation. It also intends to increase the age at which staff can retire on a full pension from 65 to 67.
However, Tesco maintained that its scheme was still “one of the best” around. “Whilst many other schemes cap inflation at 2.5% each year, we’ll keep the current cap at 5%. This is especially important in times of higher than normal inflation, like now,” said a spokeswoman.
It also remained a defined benefit scheme, she added. “We are retaining the defined benefit scheme when most companies have closed theirs,” she said. “Only three other FTSE 100 companies still have one. Because people are living much longer pensions cost much more to provide. These changes make our defined benefit scheme sustainable.”
The plans to change retirement benefits are due to apply as from 1 June, although Tesco stressed the proposals would not hit pensions that had already been built up before then.
A key saving for Tesco will be the move to the CPI after 1 June, in line with government changes to the state pension and other benefits.