THE Co-operative Group has announced plans to merge three existing staff pension schemes and end all final salary pensions from April 5 this year.
As a result, 22,000 participating employees working for the Co-op Bank, CIS and the Group will face a cut in their retirement income.
However spokesman Nick Eyre said the new defined pension scheme would be more equitable and progressive than the current arrangements and insisted that the changes were needed to protect the long-term sustainability of pension provision within the Group.
"These changes are about controlling costs and are not driven by 'black holes'. A wind of change is blowing through the pensions industry due to increased life expectancy and spiralling costs," said Mr Eyre, the Group's Secretary.
"The reality is that every large entity with a final salary scheme should be reviewing its sustainability and, even after the changes, the new Group scheme will be one of the most attractive around."
Although expressing disquiet and disappointment at the proposals – which follow an 18-month review – three of the trade unions representing Group employees have advised their members to continue to participate in the scheme, which, says Usdaw, NACO and Amicus, "still represents value for money".
The new scheme will be known as the Co-operative Group Pension (Average Career Earnings) Scheme and will have assets of £ 4.7 billion – the combined total of the three current funds.
Mr Eyre said the proposed new arrangements had already been agreed in principle by the three sets of trustees, but would need to be formally approved both by the trustees and the Pensions Regulator prior to the April change-over.
He added: "In devising this scheme we have ensured that a number of important features have been delivered. The scheme will be fully funded and will be prudently and cautiously run.
"It is fair and equitable for all employees and is more suited to flexible working and lifestyle patterns than was the case previously. We have also looked to protect existing accrued benefits and maintain a link to future earnings in relation to those benefits, which we know are aspects our staff value and appreciate.
"Our employees can plan ahead knowing that their pensions will be protected against future investment returns and increasing lifespans, so the scheme remains an important part of their overall benefit package."
• Further details and reaction in the next Co-op News to be published on Tuesday (January 10).