Sainsbury's scheme surges into surplus after PIE and mortality assumption update

Liabilities slashed by £1.2bn

James Phillips
clock • 1 min read

The Sainsbury's Pension Scheme has moved into an aggregate surplus position after gains from a pension increase exchange (PIE) exercise and adopting updated mortality assumptions.

As of 9 March, the supermarket giant's scheme, which has two sections, recorded a total post-tax accounting surplus of £743m and a funding level of 108%, according to the retailer's annual report, published today (5 June).

The figure includes £34m of liabilities for unfunded obligations, and comprises a £844m surplus in the Sainsbury's section and a £101m deficit in the Argos section.

The position has improved markedly since last year when the schemes had a combined deficit of £261m, and includes a £31m gain from the PIE exercise conducted for the Sainsbury's section, which took effect in April 2018.

Further gains were recognised after the adoption of updated mortality tables, and then updating these to reflect the latest experience in the scheme. Liabilities across the two sections fell by £1.2bn, based on the use of the Self-Administered Pension Scheme (SAPS) S2 tables as base assumptions and the Continuous Mortality Investigation's 2018 projections for future mortality improvements.

This was partly offset by the cost of equalising guaranteed minimum pensions (GMPs), which was calculated as £98m for the Sainsbury's section, and £3m for the Argos section, roughly 1.1% of total liabilities.

In total, the scheme had £8.9bn of liabilities and £10bn of assets before minimum funding requirements, unfunded obligations and deferred income tax were accounted for.

According to the annual report, the scheme has also de-risked some of its assets, reducing its equity exposure from £1.7bn to £1.3bn, while increasing its bond allocation from £5.4bn to £6bn.

The scheme is in the process of agreeing its 2018 triennial valuation, which has led to some of the gains the company has recognised in its reporting.

The supermarket expects to continue paying benefits for members in the Sainsbury's section for a further 19 years and, for the Argos section, 21 years.

James Phillips
Author spotlight

James Phillips

Professional Pensions journalist from 2016-2022

More on Defined Benefit

Longevity assumption update could save sponsors 'millions'

Longevity assumption update could save sponsors 'millions'

Hymans Robertson finds CMI model update could mean 3% reduction in liabilities

Jasmine Urquhart
clock 27 March 2024 • 2 min read
DB transfer activity falls to record lows in February

DB transfer activity falls to record lows in February

XPS finds transfer activity hit lowest levels since index’s inception in May 2018

Martin Richmond
clock 27 March 2024 • 1 min read
PIC posts 68% rise in new business premiums amid record year for BPA

PIC posts 68% rise in new business premiums amid record year for BPA

Specialist DB insurer wrote £6.9bn of new business premiums in 2023

Martin Richmond
clock 27 March 2024 • 3 min read
Trustpilot