Sainsbury’s has seen the shortfall of its defined benefit (DB) scheme increase to £1.1bn by 24 September following a “significant” fall in discount rates.
Announced in the supermarket giant’s results on 9 November, it revealed the deficit on an IAS 19 accounting basis had risen by £674m after tax since the year-end of 12 March 2016.
The group said this was mainly driven by a drop in the discount rate since the year-end from 3.65% to 2.20%.
It comes as the scheme’s March 2015 triennial valuation has been concluded with the trustee and sponsor, with deficit recovery payments to increase by £6m to £84m per annum until March 2021.
The valuation carried out by the scheme’s actuary Willis Towers Watson found the deficit as of 14 March 2015 was £740m, an increase of £148m from the March 2012 valuation.
Sainsbury’s group pension deficit on an IAS 19 accounting basis increased to £1.3bn by 24 September. This figure includes the pension deficit inherited from its recent acquisition of Home Retail Group (HRG). Both schemes are closed to future accrual.
The HRG scheme’s IAS 19 deficit was £249m after tax as at 24 September 2016.
Under a triennial valuation dated 31 March 2015, the scheme had an actuarial deficit of £315m, an increase of £157m from its March 2012 valuation.
Since the most recent valuation, the scheme has received £50m in relation to HRG’s sale of Homebase to Wesfarmers (of which £24m was paid after the acquisition) and £50m from Sainsbury’s. Yearly deficit contributions have been agreed at £40m until October 2021.
Sainsbury’s £1.4bn acquisition of HRG, which is the owner of Argos and Habitat, was completed in September.