Associated British Foods’ main UK defined benefit scheme has seen an IAS19 deficit of £94m turn into a surplus of £633m as a result of “large asset gains” on its assets.
In its 2021 annual results, which covered the 53 weeks to 18 September, the food, ingredients and retail group said its overall IAS19 funding position - which also includes assets and liabilities from other UK and international schemes - rose from a deficit of £66m last year to a surplus of £493m this year.
The group - which owns brands such as Primark, Twinings and Silver Spoon - said the increase in the UK pension surplus was driven by large asset gains on the pension assets. It added its liabilities increased "marginally" due to adverse changes in inflation assumptions.
The last triennial valuation of the main UK scheme - which is closed to future accrual but remains open to future accrual - was undertaken at 5 April 2020 which determined a deficit of £302m.
ABF said this valuation was performed just after the first Covid-19 measures were introduced - adding that while it was required to agree a recovery plan with the trustees at this point, in the light of the subsequent asset performance, it did not currently expect to make any payments.
The scheme's assets are managed using a risk-controlled investment strategy, which includes a liability-driven investment policy that seeks to match, where appropriate, the profile of the liabilities - including the use of derivative instruments to hedge inflation, interest and foreign exchange risks.
To date, the scheme is fully hedged for 75% of inflation sensitivity and 48% of interest rate risk. It is intended to hedge 80% of total exposure.
ABF's UK schemes had a strong equity weighting at year end - holding around £1.25bn in equities, £840m in government bonds, £812m in corporate and other bonds, £360m in property and £1.06bn in cash and other assets. Last year, the respective figures were £1.12bn, £755m, £715m, £345m and £831m.