The Pensions Regulator and Sainsbury's have confirmed they are in talks over the impact of the Asda tie-up on the supermarket's defined benefit (DB) pension scheme.
This follows the announcement made on Monday that Asda's DB pension scheme will be retained by Walmart, following the merger, which will see Asda acquired by Sainsbury's and merged into a single £51bn enlarged business, but retaining separate supermarket brands.
Asda's defined contribution (DC) scheme, Sainsbury's DB scheme and Argos DB scheme will be managed by the combined businesses.
Talks between the regulator and Sainsbury's were confirmed after the Work and Pensions Committee chairman Frank Field called on Sainsbury's chief executive officer Mike Coupe to seek clearance for the tie-up from TPR.
In his letter to Coupe, Field noted that Walmart assuming the responsibility for Asda's DB scheme opened up the question of how the merger would affect Sainsbury's DB pension scheme, which had a combined IAS19 deficit of £974m on an accounting basis in March 2017.
He also noted that the schemes' deficits were £408m a year earlier, with the increased shortfall largely due to the acquisition of Home Retail Group in September 2016.
Field said: "In addition to seeking regulatory approval from the Competition and Markets Authority and Prudential Regulation Authority and Financial Conduct Authority, will you also undertake to apply for clearance from the Pensions Regulator in respect of the deal?"
He also asked whether the terms of the proposed deal included any specific provision for Sainsbury's DB schemes, and what risk-analysis had been done on the impact of the tie-up on the covenant, or financial strength of the newly combined group to fund any pension shortfall.
In a response published yesterday (1 May), Coupe said "we are already working closely with TPR and will continue to do", and mentioned that the proposal had already been shared with a sub-group of the trustee board, including independent trustees, who "based on the information provided, were supportive".
According to Coupe, the proposed combined group would be responsible for one scheme: The Sainsbury's Pension Scheme. He also said there would be a new recovery agreement in place, and that the combined group would have a strengthened balance sheet.
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