Wm Morrison, the UK supermarket chain, is set to offer its workers a novel pension savings scheme that will help them avoid the risk of fluctuating financial markets. The scheme comes alongside a comprehensive financial education effort which will run for the next three years, designed to promote what the company calls “a culture of saving”.
Norman Pickavance, group human resources director at Morrison, said the move to what are known as “cash balance” pension plans, and the drive to upgrade workers’ understanding of personal finance, are part of a move to improve customers’ shopping experience in an increasingly fierce fight for market share in the UK supermarkets industry.
“The business driver is that we want to be a different kind of supermarket,” Mr Pickavance said. “The service we provide depends on the skills of our workforce. Keeping people for the long term is a key part of that.”
Morrison also did not want to see older workers remain on the job solely because they do not have enough savings to retire, he said. “If they don’t want to keep working, they shouldn’t have to.” Last year the UK scrapped rules allowing employers to force workers into retirement at age 65, a practice known as the default retirement age.
Morrison has retained Alvin Hall, the personal finance specialist, to do “money makeovers” with staff to teach them how to manage their personal finances, in a campaign to be known as “Save Your Dough”.
Cash balance pension schemes promise to set aside a percentage of each worker’s pay every year and guarantee that it will rise in line with an indicator such as interest rates. In the UK, Barclays Bank is one of only a handful of employers that offers such pensions, although they are common in the US.
Morrison will ask workers to contribute 5 per cent of pay to the scheme, and it will contribute a notional 9 per cent of pay for each worker each year. But rather than rise and fall with markets, the sum will rise every year in line with inflation. Mr Pickavance said Morrison had not yet decided which inflation measure will be used.
The scheme offers less security than a defined benefit plan. At retirement, workers will take their lump sum and buy an annuity, with retirement income dependent on conditions in the annuities market at the time.
Although workers may lose out during years of bull markets, they will be protected through the sort of turmoil that has prevailed in the UK since 2008 and which has destroyed the retirement hopes of many older workers who now find they must remain at work.
Mr Pickavance said that Morrison had held focus groups to determine what type of benefit would best suit its staff and found widespread distrust of pensions because of recent stock market losses. Particularly among junior staff, he said, “there is a really negative emotion about [investment] losses.”
Fewer than 10 per cent of Morrison’s 132,000 employees are in the defined contribution scheme, which is open to new and existing workers and in which the supermarket matches each worker’s contribution of 5 per cent of pay with a similar sum of its own.