Sainsbury’s deficit falls by £589m ahead of Asda merger; Walmart to retain scheme

Sainsbury’s defined benefit pension deficit has reduced by £589m to £261m on an IAS 19 accounting basis, ahead of its merger with Asda, it has announced.

The decrease in liabilities was highlighted in the retail giant’s full year unaudited results released today, 30 April 2018, and were driven by a rise in the discount rate from 2.7 per cent to 2.8 per cent, as well as updating future mortality assumptions.

The group’s deficit is made up of £75m from the Sainsbury’s scheme, £147m from the Argos scheme, a further £35m of unfunded obligations and £4m of deferred income tax liability.

In a statement, Sainsbury’s said: “The discount rate applied to the group's pension schemes has been increased this year to use a revised approach that we believe better reflects expected yields on high quality corporate bonds over the duration of the group's pension schemes.

“In addition, future mortality assumptions have been updated from CMI 2015 projections at 2017 year end to CMI 2017 projections.”

The group said it has agreed to make annual contributions of £124m, £84m for the Sainsbury’s scheme and £40m to the Argos scheme.

The group also announced today that it would be merging with Asda to create an “enlarged business”.

A statement on the merger said: “The interests of pension holders will be protected, with Walmart retaining the Asda defined benefit pension scheme, along with any ongoing defined benefit pension related obligations. The combined business will continue to operate the existing Asda defined contribution scheme.”

The deal is subject to regulatory approval and agreement with the trustees of the Asda Group Pension Scheme, to allow it to remain with Walmart.

An Asda spokesperson said the trustee's reaction has been positive.

In January, Asda said it was undertaking a 60 day consultation on its pension scheme, which could mean staff have less choice about saving for their retirement, changes to the death in service provision, as well as their contributions not being matched by the firm, a move trade union Usdaw called a “slap in the face”.

Despite this, there has been no further updates on whether Asda will introduce the proposed changes to its pension scheme, but it did say it was “listening” to staff on the issue.

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