Tesco has revealed its pension deficit dropped by £2.8bn in the year to February 2018, down from £5.5bn to £2.7bn.

In its preliminary results for 2017/18, published today, the supermarket said the reduction was partly driven by an increase in yields on corporate bonds, which drive the discount rate used for accounting purposes.

As previously announced, Tesco has also updated the discount rate model in line with developing market practice, following actuarial advice. Tesco believes the discount rate now “more appropriately reflects expected yields on corporate bonds over the life of the scheme's liabilities”.

It also said the application of the latest industry life expectancy tables and favourable actual scheme experience, have also contributed to the reduction.

Following the conclusion of it triennial valuation, the supermarket has agreed with the trustee to increase annual contributions by £15m to £285m from April 2018, which will be paid for 10 years.

As at 31 March 2017, the actuarial deficit was £3bn, an increase of c.£0.25bn since the last triennial valuation. The market value of the scheme’s assets was £13.1bn.

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