Morrisons axes final salary scheme despite growth spurt

From July, the 10,000 employees in the group's pension scheme will find their pension will be based on an average of what they have earned over their careers rather than on their final pay when they retire. This means they are likely to end up on a lower pension than under the previous system.

The news comes a day after Barclays said it was closing its final salary pension scheme, and would shift its 18,000 members to a cheaper retirement plan paying out on the basis of what they have saved rather than what they earned.

Industry experts say many companies are taking advantage of the recession and tough economic circumstances to reduce pension costs and cut the benefits to employees.

The National Association of Pension Funds has forecast that up to a quarter of all private-sector firms are considering closing their final salary schemes this year.

Companies' pension schemes have been hit by the downturn in share prices which has meant they have a combined deficit of around £200 billion. Many have closed final salary pension schemes to new workers, BP having been the latest to do so this week.

The Morrisons pension scheme has already been shut to new workers, who are only offered a money purchase pension. Finance director Richard Pennycooksaid: "We have been in discussions with the pension trustees for a long time. We have pumped some £200 million into the schemes, reduced the funds' exposure to equities and moved actuarial assumptions, particularly on mortality, to a very prudent level.

"We are not closing the scheme as such but people will move from a pension based on their final salary to one which moves in line with inflation."

The shift will mean that Morrisons will receive an exceptional credit at the end of this half year because its liabilities to the £2 billion pension scheme will have been reduced.

The news came as Morrisons confirmed that it continues to outstrip competitors Tesco, Asda and Sainsbury's in winning new customers and growing sales. Chief executive Marc Bolland said that in the latest three months to 3 May an extra 500,000 customers a week had come through the retailer's doors.

He said: "We saw particularly strong growth in London and the South as well as in Scotland. New customers came from every social group and their average basket spend has been higher than that of existing customers.

"We believe that many of them didn't know Morrisons before and when they came in and saw our fresh produce and our Market Street - they liked what they found."

Same-store sales in the first quarter rose by 8.2% which is the same rate as for the previous full financial year and slightly better than City forecasts.