Date: 24 June 2010
If you’re a pre-1996 joiner, how will Tesco’s offer to buy out your Saturday Premium and Retained Pay elements affect your Tesco pension?
The effect on your pension depends on which scheme you are in.
To find out, please refer to your last benefit report or your
payslip. Your payslip will say SMARTPB for Pension Builder or
SMARTFS for Final Salary.
Final Salary Scheme
The earnings recognised by the scheme for
calculating pensions and contributions are known as
All the three allowances:
- Saturday Premium
- Retained Pay (Nights)
- Retained Pay (Location)
are classed as Pensionable Earnings.
By accepting the buyout offer your Pensionable
Earnings will go down because it they be reduced by your annual
allowances. As a result:
- You will pay slightly lower
- Your pension will probably
be slightly less as well
When you come to retirement the pension you
receive will be based on Final Pensionable
Usually Final Pensionable
Earnings is the Pensionable Earnings in the 12 months before
Pensionable Earnings can be whichever is the
- Pensionable Earnings in the last 12 months,
- The highest single years Pensionable Earnings
in the last 5 years, or
- The average of the best 3 consecutive years
Pensionable Earnings in the last 10 years before retirement
If you are about to retire (within 10 years)
your pension may or may not be affected. It
will depend on your circumstances. If it is affected, it will
probably be only be slightly less than if the allowances were still
part of your pay, because for most people the allowances are a
small proportion of their pay.
If you are quite a few years away from
retirement (more than 10 years) your pension will be
affected as it will be based on your new Pensionable
Earnings. Again, it will only be slightly less than if the
allowances were still part of your pay and as the allowances were
frozen they would have become an increasingly smaller proportion of
your pay over time anyway.
The lump sum buyout will not be
treated as Pensionable Earnings so you won’t pay contributions or
earn pension on the amount you receive.
If you are worried about how this will affect
your pension please contact the Tesco pensions department on 0845
Pension Builder Scheme
The lump sum buyout will be treated as
pensionable in the week that it is paid. You will benefit
from a higher foundation pension for that year as a result.
In the future your pension will be based on your new
Additional Voluntary Contributions (AVCs)
You can reduce the tax you pay on your buyout
lump sum and use it to increase your pension by converting it to
This will be taken direct from your gross pay
which means you will save tax on this amount.
If you want to do this you
must tell your Personnel/Compliance Manager at the
time you sign your acceptance form and before the 30th July
You will then need to go the Pension Website
(userid Tesco password mypension)
and print out an AVC form, complete it and send it to
theTesco Pension Trustees Limited, PO Box 4126,
Cardiff, CF14 4ZP.