The John Lewis Partnership is scrapping its defined-benefit pension scheme as the group battles to cut costs.
The partnership, which owns the John Lewis & Partners department store business and sister retailer Waitrose & Partners, said the scheme linked to workers’ final salaries would be replaced by a defined contribution scheme.
John Lewis will match staff payments of up to 8% of salary. After three years of service, workers’ pension pots will get an additional 4% of pay from the company, whether or not they pay into the scheme themselves.
The changes, which come into effect from April next year, will impact the partnership’s nearly 84,000 workers and save the business £80m a year in pension costs.
The partnership had been one of the few UK companies still offering staff a link to final salaries in its pension scheme, but has made the move in a bid to reduce costs in an increasingly turbulent retail market.
John Lewis had already switched to a hybrid pension model four years ago and slashed its annual bonus to 3% last year – the lowest level for 66 years – after profits tumbled.
The group had matched all staff contributions of up to 4.5% and gave workers pension payments worth 1/120th of their final salary for every year of service without employees having to make a contribution to the scheme.
But John Lewis said the new salary scheme would be “more affordable, supporting the partnership’s strategy of improving its long-term financial sustainability”.
JLP is investing heavily to reinvent its department store portfolio and grow its online business as it adapts to rapidly changing shopper habits.
John Lewis has also been hit by discounting at troubled rivals House of Fraser and Debenhams, with its ‘never knowingly undersold’ promise forcing it to price match such businesses and eating into margins.
It has also closed stores and cut jobs amid rising costs including the national living wage, the apprenticeship levy and increases to business rates.
Against an already difficult backdrop, the uncertain political environment following the Brexit vote and stagnant wage growth has prompted a slowdown in consumer spending.