UK - Supermarket giant J. Sainsbury has seen its FRS17 pensions deficit balloon from £368m at the end of March to £1.1bn, City analysts claim.
The analysts attribute the rise to the heavy equity weightings held by both the UK-based J. Sainsbury Pension & Death Benefits Scheme and its US counterpart.
At the end of March, they had liabilities of £3.2bn and assets of around £2.8bn, of which £2.1bn is invested in equities.
Analysts say that since March, the value of Sainsbury’s equities will have fallen by at least 20% – or £562m – while its liabilities will have increased by £200m due to the fall in interest rates. On this basis, funding levels have fallen from 88% in March, to just 67% now.
The firm will conduct an actuarial valuation next April, and one City analyst said it was “virtually certain” that contributions would increase sharply.
Sainsbury’s currently contributes 8.5% but the analyst believes this will have to more than double to 18%, or £50m.
While Sainsbury’s pensions manager Geof Pearson conceded that the scheme had fallen into an actuarial deficit, he attacked the analysts’ claims.
He said: “This is just a repetition – it’s annoying and boring. We heard this months ago, and all FRS17 does is assume that everybody is invested in corporate bonds.”
Pearson added that the firm has already increased contributions to its schemes.
At March 2002, the company contributed an additional £15m – equivalent to 3% – in to the schemes, on top of its existing contribution rate.
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