Premier Foods increases pension surplus by £212.2m

Written by Natalie Tuck

Premier Foods has increased its defined benefit pension surplus by £212.2m, it has revealed.

Publishing its final results for the year end 31 March 2018, the food manufacturer of brands such as Oxo, Sharwoods, Batchelors, Mr Kipling and Lloyd Grossman said its IAS 19 pension scheme valuation reported a total surplus of £317m (£263.1M net of deferred tax) for its RHM and Premier Food’s pension schemes. This compares to a surplus of £104.8m (£87m net of deferred tax).

It noted that a deferred tax rate of 17 per cent was deducted from the valuation to reflect the fact that the group’s deficit contributions made to the pension schemes are allowable for tax. Pension contributions in the year were £39.8m, in line with expectations, and a reduction of £11.9m from the prior year, which it said was principally due to the re-negotiation of deficit contributions to the group's pension schemes announced in March 2017.

When looked at individually, the RHM schemes had a surplus of £754m, and the Premier Foods schemes had a deficit of £437m. Assets in the combined schemes were just £1m lower than the same point last year at £4,863.6m. RHM scheme assets decreased by £6.4m to £4,184.5m while the Premier Foods' schemes assets increased by £5.4m.

In addition, liabilities in the combined schemes decreased by £213.2m in the year to £4,546.6m. The value of liabilities associated with the RHM scheme were £3,430.5m, a reduction of £166.5m while liabilities in the Premier Foods schemes were £46.7m lower at £1,116.1m.

Premier Foods said the reduction in the value of liabilities in both schemes is due to a slight increase in the discount rate assumption, from 2.65 per cent to 2.70 per cent and a reduction in the inflation rate assumption; from 3.3 per cent to 3.15 per cent.

Furthermore, it revealed that the RHM pension scheme has largely hedged its inflation and interest rate exposure to the extent of its funding level. Two of the Premier Foods schemes, the PFPS and PGPPS, have broadly hedged 50 per cent of their respective liabilities and have put in place a plan to further increase hedging over time as its funding level improves.

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