Tesco to consult on closure of defined benefit pension fund
Tesco plans to close its defined benefit pension fund to new accrual in an attempt to strengthen its balance sheet.
The retailer, one of the UK’s leading supermarkets, has suffered financially in recent months after it revealed in October that an accounting error resulted in profits being overstated.
In an announcement to the London Stock Exchange, the company said it would launch a consultation to close the fund, which reported a deficit of £2.6bn (€3.3bn) in its most recent annual report, to “all colleagues”.
Following a valuation in May, it will launch the consultation in June, aiming to implement all changes by February 2016, the company said in a presentation made to shareholders.
A spokesman was not immediately able to say whether it would set up a new pension scheme, potentially a defined contribution (DC) arrangement.
It currently enrols its workforce into the DB fund, and, as one of the largest UK employers, was one of the first made to comply with automatic enrolment upon its launch.
It is one of the few remaining large employers to still offer DB benefits, alongside fellow supermarket chain Morrisons.
In an interview with IPE last year, Steven Daniels, CIO of in-house asset manager Tesco Pension Investments, said the fund would see its cashflows remain positive for a significant amount of time, even if it closed immediately.
The £8bn career-average scheme had more than 335,000 members last year, with 200,000 actives and only 45,000 pensioners.