Tesco makes big changes to staff pension

Thumb_laura-kuenssberg
Tesco store
Tesco store Photo: ITN

The country's biggest private employer, Tesco, is making big changes to the pension that it offers its staff.

In future they'll have to work two more years to receive their full entitlement. And that entitlement could be smaller, as they seek to link pension pots to the lower rate of inflation. It won't affect employees who are already about to retire but it's reckoned it will affect about 170,000.

If you are one of them then clearly it will not be a welcome development. Pensions experts calculate it could mean a reduction of about 20 per cent in the level of the pension over 20 years. Not great.

Tesco store
Tesco store Credit: Reuters

But it is worth bearing in mind that Tesco is not checking out of offering decent pensions altogether. They are sticking with what's known as a 'defined benefit' scheme, where the eventual payouts are related to what staff have earned, rather than how the scheme's investments in the stock markets perform. In fact only about ten per cent of firms still offer these. In this sense, Tesco is still more generous than the vast majority of private firms.

But what is perhaps more interesting is that they are one of the first big employers to raise the retirement age at which the pension actually becomes payable. And such is Tesco's size, that where they lead others tend to follow.