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03-10-2019

Tesco pension deficit shrinks £240m

The overall pension deficit of Tesco's UK pension schemes has fallen by £240m to £2,098m in the six months preceding August 2019, its interim results report has revealed.

The decline brings the deficit in line with this time last year, when it also stood at around £2,100m.

Strong asset performance was cited as the key driver behind the fall in deficit, including of its LDI portfolio, although this was slightly offset by an increase in the measurement of scheme liabilities due to a fall in corporate bond yields.

The supermarket giant paid £144m in pension deficit contributions over the past year, up slightly from last years figure of £142m.

Additionally, Tesco's pension obligations decreased slightly from February 2019, falling from £2,808m to £2,514m.

Net pension finance costs fell by £9m year-on-year, primarily due to a lower opening deficit, and are expected to total around £72m for the full year in 2019.

The primary defined benefit pension scheme operated by Tesco is the Tesco PLC Pension Scheme, a UK scheme closed to future accrual.

The next triennial actuarial valuation is effective as at 31 March 2020.

It was announced today that Tesco CEO Dave Lewis will be stepping down in the summer of 2020, to be replaced by Ken Murphy.

Murphy's basic salary will be £1.35m per annum and his pension contribution will be 7.5 per cent of basic salary, in line with the wider Tesco workforce in the UK.

New Investment Association guidelines stipulate that companies must pay all executive directors the same pension contribution levels as the majority of their workforce by the end of 2022, or risk shareholder action.

Commenting on his departure, Lewis said: "My decision to step down as group CEO is a personal one.

“I believe that the tenure of the CEO should be a finite one and that now is the right time to pass the baton.

“Our turnaround is complete, we have delivered all the metrics we set for ourselves.  The leadership team is very strong, our strategy is clear and it is delivering.”

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