UK - Sainsbury's has made a raft of changes in a bid to plug rising deficits in its defined benefit (DB) pension scheme, including a £350m cash injection and a doubling of its annual deficit payments.
Sainsbury’s said it planned to raise up to £2.07bn of new secured debt of which £1.7bn would be used to buy back its unsecured bonds. Some of that will be used used to make a £350m pension pay out in two installments, £150m in March and £200m in May.
The company is also increasing annual deficit payments by £18m to £38m, with the first payment to be made in March 2007.
In order to keep their benefits, active members will have to increase their contributions by 3% to 7.25%. The injection and the increased annual payments would fund the last reported deficit of £582m deficit, said Sainsbury chief executive Justin King [pictured]. “In addition the increase in the members’ contributions together with the changes to future benefits will achieve a more appropriate and balanced sharing of cost and risk.”
Following consultation, the scheme’s trustees said they would review the schemes’ investment strategies with the aim of reducing risk.
Sainsbury pension scheme trustee board chairman John Adshead said the agreement reached was a fair balance between the needs and expectations of members and the financial support provided by Sainsbury’s to improve the funding of the schemes and increase the security of benefits.
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