Sainsbury’s has provided a £575m loan facility to the group’s defined benefit (DB) pension scheme, in an effort to further enhance the pension scheme’s resilience following recent gilt market volatility.

The facility, which will remain in place for 3 months, is expected to help protect the scheme in the event of unexpected substantial further rises in interest rates, and was agreed in light of the market volatility prompted by the mini-Budget on 23 September.

"The group's pension scheme adopts a collateral sufficiency framework which ensures sufficient high quality liquid assets are maintained in order to meet liquidity requirements, even in times of market stress," Sainsbury's half year report stated.

"Subsequent to the balance sheet date, an unsecured term facility for £575m was entered into in October 2022, with an ultimate maturity date of 30 November 2024. As at the date of signing the term facility was undrawn."

The interim accounts also confirmed that the scheme has seen a "significant decrease" in the value of the group's pension scheme's assets, and also its liabilities, as a result of gilt market volatility, despite interventions from the Bank of England.

Prior to the volatility, however, the scheme had recorded a net DB surplus of £1,455m as at 17 September 2022, representing a £828m decrease from 5 March 2022, driven by remeasurement losses resulting from the net impact of rising interest rates on both plan assets and liabilities.

Funding improvements had also previously been seen in the scheme's triennial actuarial valuation as at 30 September 2021, which revealed an actuarial surplus of £130m, up from a £538m deficit in 2018.

The interim results stated that the asset backed contributions (ABC) structure established by Sainsbury's in July 2019 also continues to "deliver as planned", with some of the payments from this switching to the Argos pension section from March 2022, as the Sainsbury's section reached its funding target in December 2021.

According to the interim results, the group paid pensions contributions totalling £23m in H1 2022/23, with total pension scheme cash contributions are expected to be £53m for 2022/23.

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