Co-operative society sees 8% pension opt-out

EXCLUSIVE: The Heart of England Co-operative Society has seen opt-out rates of 8% since launching a new master trust pension scheme to comply with auto-enrolment, although it is still two months away from its staging date on 1 September 2013.

The society, which operates supermarkets, department stores, funeral homes and travel agents, has auto-enrolled new joiners into the scheme since it was launched in October 2012.

Since that date, 400 staff have been enrolled into the scheme, of which 8% have opted out.

The remainder of the organisation’s 964 employees are members of a defined benefit (DB) pension scheme, which was closed to new entrants in October 2012.

Ali Kurji, chief executive officer at Heart of England Co-operative Society, said: “It was clear that, in the long term, the scheme wasn’t sustainable.

“The decision to close our final salary scheme wasn’t taken lightly and it coincided with a need to review our pension arrangements in light of auto-enrolment.

“As a co-operative society, we’ve always taken a paternalistic attitude [to pensions] and our top priority in making this change was to ensure that new employees had access to a workplace pension that emulated many of the features of the DB scheme, namely providing reasonable predictable benefits.”

At the end of 2012, the society held a beauty parade with a number of providers. It chose to launch a master trust with Now: Pensions because it felt it most closely replicated its previous DB pension.

“We liked the fact that members don’t have to make an investment choice [because] Now: Pensions offers a guided investment solution that flexes with market conditions,” said Kurji. “Risk reduces towards retirement as the fund moves into a protection phase to preserve the buying power of members’ funds.

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“The master trust structure was fairly reassuring and, overall, we felt that it was the option that had least impact on staff.”

New employees since October 2012 are now automatically enrolled into the master trust scheme. Employees can contribute either 4% or 5%, while the employer contributes 8.3% and 10.3%, respectively.