Sainsbury’s has provided a £500m loan facility to its defined benefit (DB) scheme in the wake of the recent market turmoil.
In its interim results, published yesterday (3 November) on the London Stock Exchange, the supermarket chain revealed it had put the loan facility in place on 18 October as a result of high increases in gilt yields which led to a "significant decrease on the value of the group's pension scheme assets, and also its liabilities".
The loan facility is designed to "further enhance the scheme's resilience in the event of unexpected substantial further rises in interest rates". The company have said the loan will remain in place for three months.
Chief financial officer Kevin O'Byrne said: "We decided to put a short-term loan in place should they require it. If there was a spike on the Monday or Tuesday, we didn't want them to have to do anything irrational like sell assets the wrong time."
He added that the scheme's trustees would be reviewing the investment strategy following the turbulence caused by the gilt markets.
"We are giving it some thought. We think liability driven investments has a strong role to play particularly in a well-funded scheme which should be well hedged, and our funding levels were well protected."
The results also showed that following the completion of a triennial valuation last year, as of 30 September 2021, the group's scheme - which comprises the Sainsbury's section and the Argos section - had an overall surplus of £130m, compared to a £538m deficit in 2018.
Breaking down the surplus, the results revealed the Sainsbury's section of the scheme had a surplus of £231m, while the Argos section had a deficit of £101m.
The results also revealed that following a payment of £23m in contributions for H1 2022, the Sainsbury's section of the scheme is now fully funded, and no further contributions will be made.
