The Sainsbury's defined benefit (DB) pension scheme surplus has fallen to £1,012m, as at 19 September 2020, according to its latest financial accounts.

This represents a £107m fall since March, which was driven by an increase in the scheme liabilities due to changes in the financial assumptions.

The group clarified that this was offset by favourable movements on scheme assets, which are held at fair value, with the discount rate remaining constant since year-end at 1.6 per cent.

The total DB pension surplus for the group is made up of a £4m surplus under the Argos section of the DB pension scheme, combined with a £1,008m surplus under the Sainsbury’s section.

The group has made cash contributions and asset backed contribution (ABC) distributions of £60m in H1 2020, with a further £42m agreed to be paid in H2.

Meanwhile further cash contributions and ABC distributions for 2021/22 are expected to total £76m.

The group previously reached an agreement with the trustee to establish a new ABC structure in July 2019, which saw all properties with a value of £1.35bn were transferred into a newly formed property holding company, a wholly owned subsidiary of the group, and leased to other group entities.

Under the agreement, rental receipts facilitate payments of interest and capital on loan notes issued to a Scottish Limited Partnership, in which the scheme holds an interest.

This in turn entitles the scheme to annual distributions over 20 years to be made through three payment streams, with approximately £15m per year into the Sainsbury’s section, and around £20m a year into the Argos section.

This is alongside a switching payment of around £23m per year, expected to increase to £33m by 2038, which is initially paid into the Sainsbury’s section, until the funding target is achieved, when payments switch to the Argos section.

Commenting on the group's accounts, J Sainsbury plc chief executive, Simon Roberts, said: "As we go into lockdown in England for the second time this year and restrictions are in place across the UK, we know our customers and colleagues are feeling anxious and we will do all we can to support them.

"While we are working hard to help feed the nation through the pandemic, we have also spent time thinking about how we deliver for our customers and our shareholders over the longer term.

"Given the unprecedented circumstances of this year and the challenges facing our colleagues, including the changes we are announcing today, I have informed the Board that if a bonus is payable, I will waive any bonus entitlement for this financial year.

"We are raising our ambitions. By delivering improvements in value and quality and simplifying this business, we will do a better job for our customers and deliver an improved financial performance and stronger shareholder returns.

"Right here and now I and all the team are focused on supporting and delivering for our customers in the days and weeks ahead."

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