mast image

Impact Investing

IPE special report May 2018


UK retailer John Lewis sees pension costs rise despite deficit drop

Related Categories

UK retailer John Lewis has seen its pension costs rise by £60m (€82m) over the course of the current financial year, despite a 7% drop in its pension deficit.

The department store, which operates as a mutual, said its deficit stood at £1.1bn at the beginning of January, down by £92.9m over January 2015.

According to its half-yearly report, profit before tax was down by 26% due to the higher pension charges.

Charlie Mayfield, the company’s chairman, said the increase in pension charges was caused by “volatility in the market-driven assumptions”.

The 7.4% improvement in deficit was likely down to changes to the pension fund’s underlying assumptions, which saw its discount rate rise from 3.15% to 3.65% over the first half of the year.

At the same time, both assumptions underlying the measures of inflation – the consumer and the retail prices index – rose by 0.45 percentage points to 2.25% and 3.25%, respectively.

The report added: “The pension operating cost was £122.4m, an increase of £30.3m, or 32.9%, on the prior year costs, predominantly reflecting the substantial decline in the real discount rate used to determine the cost to 0.35% at the beginning of the year from 1.1% at the beginning of the previous year.”

Have your say

You must sign in to make a comment