John Lewis’ defined benefit pension scheme deficit has dropped by over £100m to £62.8m over the past year.

In its half-year financial report, the retailer says that the decrease, a significant shift from the previous year’s £171.3m deficit, is due to its decision on 15 May to close the fund to future accrual from 1 April 2020.

Following closure, members' deferred pensions will now increase annually by inflation up to five per cent per annum, resulting in a reduction in the scheme’s obligation of £156m.

This reflects a past service gain of £249m, recognised as an exceptional credit as of 27 July, due to the break in future salary linkage.

The gain has been partially offset by a £93m actuarial loss, which the report says reflects a decrease in future expected commutation of DB pensions.

The scheme has also benefitted from £77.6m in interest on assets and £62.6m from contributions. Its current liabilities sit at £56.2m.

John Lewis has posted losses of £25.9m for the first half of the year.

However, Sir Charlie Mayfield, partner and chairman of the John Lewis Partnership, said that closure of the DB scheme to future accrual allows the company to significantly strengthen its balance sheet position.

“Total net debts have reduced by £469.2m compared to July 2018. This is due to strong cash generation and tight cash management as well as the decision to close our final salary defined benefit pension scheme,” he said.

“The latter is also the main contributor to our exceptional income.”

Share Story: