New Morrisons Pension

hugheskevi

Does the paywalled article say that, because the non-paywalled one certainly doesn't?

The non-paywalled one states:

Defined benefit plans, which include cash balance pension schemes, guarantee employees a certain amount of cash at retirement.

even assuming as true its claim that the new auto-enrolment rules redefine the term 'defined benefit' to mean what you say

The automatic enrolment rules don't change the definition in any way, they simply say that a company using a Defined Benefit scheme for automatic enrolment can choose to delay their staging date to 2017 for existing employees (although new employees have to be automatically enrolled into the scheme).

Debt_Free_Chick

hugheskevi wrote: »

they simply say that a company using a Defined Benefit scheme for automatic enrolment can choose to delay their staging date to 2017 for existing employees (although new employees have to be automatically enrolled into the scheme).

Almost .... An employer using a DB scheme for AE can delay AE for those who were eligible jobholders on the staging date to 2017. Staging can not be delayed but - with a DB (or hybrid) scheme - AE can be delayed, but only for eligible jobholders on the staging date.

Debt_Free_Chick

hugheskevi wrote: »

Lots of people use the term Defined Benefit incorrectly, often interchangeably for final salary when it is a technical term and much broader than final salary. Of course, people can be misled if they don't understand technical terms and interpret them incorrectly.

Completely agree

The key is "defined benefit". The "benefit" does not need to be expressed as an annual pension. Morrisons is providing a defined cash benefit - which is .... Defined Benefit! But not a Defined Pension/Defined Income

Debt_Free_Chick

Linton wrote: »

I cant find any info anywhere about what happens to early leavers on the Morrison scheme. This is definitely something that needs to be clearly spelled out.

I completely agree. I am a pensions professional and I'm struggling to understand the full nature of the promise being made by Morrisons. They say

"As a member of the Retirement Saver, you pay 5% of each year's pensionable pay and Morrisons will guarantee your Retirement Saver pot will be worth 16% of each year's pensionable pay while you are an active member of the Retirement Saver, assuming you retire at 65."

Does this mean that if I joined 10 years ago, on a salary of £20k, I paid in £1,000 and Morrisons guarantee that my pension pot is now worth £3,200? That total (£3,200) is simply 16% of £20k.

Is that the promise?

Linton

Debt_Free_Chick wrote: »

I completely agree. I am a pensions professional and I'm struggling to understand the full nature of the promise being made by Morrisons. They say

"As a member of the Retirement Saver, you pay 5% of each year's pensionable pay and Morrisons will guarantee your Retirement Saver pot will be worth 16% of each year's pensionable pay while you are an active member of the Retirement Saver, assuming you retire at 65."

Does this mean that if I joined 10 years ago, on a salary of £20k, I paid in £1,000 and Morrisons guarantee that my pension pot is now worth £3,200? That total (£3,200) is simply 16% of £20k.

Is that the promise?

No - if you look on their website as given in post #1 you will see that the pot increases by 16% of salary each year plus an inflation return of up to 2.5% on the previous years pot. So its a good employer mark-up but a lousy investment return. Exactly how this balances out under various scenarios is essentially where the discussion is focused.

So with a salary of £20K in the first year you pay in £1000 and the pot is worth £3200. Second year you pay in £1000 and the pot is say 1.025*£3200 + £3200 etc etc assuming no pay increase.

This is pretty generous if you leave after say 3 years and can take the full pot with you. But that's what the words on the website seem to be saying.

The promise seems to mean that your total pot is at least 16% of your total salary summed over the n years of employment.

xylophone

The key is "defined benefit". The "benefit" does not need to be expressed as an annual pension. Morrisons is providing a defined cash benefit - which is .... Defined Benefit! But not a Defined Pension/Defined Income

Hmm....This may be "technically" DB but I think Morrisons can taste the difference between Stork and butter...;)

https://www.mymorrisonsretirementsaver.co.uk/on-our-radar/on-our-radar/faqs.aspx

I note that the Scheme is "contracted in". https://www.mymorrisonsretirementsaver.co.uk/state-benefits/state-pension-benefits.aspx

I further note that Frankenstein is now known as "Defined Ambition" (DA? or was that a fifties hairstyle..)
http://www.pensionsage.com/pa/Morrisons-sidesteps-AE-regime-with-own-pension-plan.php

http://www.employeebenefits.co.uk/benefits/pensions/government-plans-defined-ambition-pension/100604.article

http://www.efinancialnews.com/story/2012-11-12/steve-webb-way-defines-ambition

"Roman poet Ovid advised: “Keep a mid course between two extremes” and Steve Webb, the UK’s pensions minister, seems to agree. But in his attempt to achieve a mid course in the UK workplace pension systems, Webb has practitioners jumping though yet another hoop.


McLean: odd time to moot defined ambition
In July, he set the industry a challenge to find a solution that strikes a balance between the increasingly polarised defined-benefit and defined-contribution pension schemes.

Defined benefits guarantee pensioners a pre-determined proportion of their salary for life but leave the company exposed to potentially unlimited liabilities, while members of defined contributions depend entirely on investment returns and annuity rates prevailing at retirement, but employers are protected against spiralling deficits."

Someone else who seems to know the difference.....:D

b33r

I know someone who works for Morrisons, they emailed the pension department and they didn't give him the exact calculation but basically you don't get the 'headline pot' as you refer to it as. I can try and get a copy of the exact answer next time I speak to him.

Debt_Free_Chick

Linton wrote: »

No - if you look on their website as given in post #1 you will see that the pot increases by 16% of salary each year plus an inflation return of up to 2.5% on the previous years pot. So its a good employer mark-up but a lousy investment return. Exactly how this balances out under various scenarios is essentially where the discussion is focused.

So with a salary of £20K in the first year you pay in £1000 and the pot is worth £3200. Second year you pay in £1000 and the pot is say 1.025*£3200 + £3200 etc etc assuming no pay increase.

This is pretty generous if you leave after say 3 years and can take the full pot with you. But that's what the words on the website seem to be saying.

The promise seems to mean that your total pot is at least 16% of your total salary summed over the n years of employment.

OK, poor example by me. Let's just take the first year's contribution where I pay £1,000. You say that the employer tops this up to £3,200 AND then that first year's pot is increased in line with inflation (CPI?)

That's the bit I can't see. Where does it say that I get a top-up to 16% of pay in each year - plus CPI increases on that amount?

I'm reading it as a top up to 16% of pay only - I don't see the CPI increase on top of that. But then I don't see a lot of detail on Morrisons site, either

Also, I can't see where the "pot increases by 16% of salary each year". As I read it, my contribution in each year is topped up to 16% of salary - but not increased by 16% each year.

Linton

Debt_Free_Chick wrote: »

OK, poor example by me. Let's just take the first year's contribution where I pay £1,000. You say that the employer tops this up to £3,200 AND then that first year's pot is increased in line with inflation (CPI?)

That's the bit I can't see. Where does it say that I get a top-up to 16% of pay in each year - plus CPI increases on that amount?

I'm reading it as a top up to 16% of pay only - I don't see the CPI increase on top of that. But then I don't see a lot of detail on Morrisons site, either

Also, I can't see where the "pot increases by 16% of salary each year". As I read it, my contribution in each year is topped up to 16% of salary - but not increased by 16% each year.

See here. If you look in the website in the same area yo will get it detailed in words.

jamesd

b33r wrote: »

I know someone who works for Morrisons, they emailed the pension department and they didn't give him the exact calculation but basically you don't get the 'headline pot' as you refer to it as. I can try and get a copy of the exact answer next time I speak to him.

Thanks, please do! For younger potential members that's the key piece that we're missing to know whether it's a good or bad deal for them.

For older members who are close to retirement it is a good deal.