Pensions - Articles - JLT EB comment on Tesco's DB scheme

 The Retail Sector is very competitive with low margins. Tesco is one of the last major retailers to provide DB benefits to employees (which, inevitably, are more generous than competitors' DC schemes). If this puts it at a competitive disadvantage (at a time when there is pressure on profits and less pressure on recruitment / retention) then inevitably Tesco has been forced to look at cheaper (DC) alternatives.

 "DB provision in the Private Sector is well and truly on the way out. The cessation of contracting-out next year (April 2016) is also a factor here. Companies which are forced to revisit [DB] pension provision or face increases in NI costs are inevitably following the herd and closing DB schemes to all employees. Active membership of Private Sector DB pension schemes now stands at little more than 1.5 million. At a stroke, Tesco will reduce the number of active employees in DB schemes by nearly 15%.

 "Tax changes are also to blame here. Repeated changes to tax allowances for pensions (and threats of more to come) have increasingly made saving for a pension less tax efficient, and for many it no longer even makes sense to direct savings into a pension.

 "This is going to be a disastrous year for DB provision in the Private Sector. Like Tesco (and following their example) very many employers will, very sadly, simply conclude that ongoing DB provision no longer makes commercial sense. I predict that ongoing DB provision in the Private Sector is going to be all but wiped out in the next 18 months. The pressure will then be on the next Government (of whatever colour) to look at the continued generous provision of DB benefits in the Public Sector."