Tesco pension fund dives by £9bn after bets backfire
The value of Tesco’s pension fund falls by £9bn and plunges into a deficit after a series of bets on supposedly ‘safe’ investments soured
The value of Tesco’s pension fund has fallen by £9bn and plunged into a deficit after a series of bets on supposedly ‘safe’ investments went sour.
Tesco’s scheme, which provides the nest eggs for 340,000 members, is the latest to be challenged due to heavy exposure to so-called Liability Driven Investments (LDIs).
These are designed to match a retirement plan’s assets, such as government IOUs known as gilts, with its liabilities — the promise to pay future retirement benefits.
Tesco scheme, which cares for the nest eggs of 340,000 members, is the latest to receive a harvest due to heavy exposure to Liability Driven Investments
But LDIs came loose last year as interest rates rose sharply, sending government bond prices plummeting and pension funds taking huge losses that experts say may never be fully recovered.
The fall in Tesco’s assets by 42 per cent to £13bn is one of the largest reported by a workplace scheme since unrest swept the pensions sector last autumn.
This followed former Chancellor Kwasi Kwarteng’s disastrous mini-budget.
Tesco’s pension fund also ran a £300m deficit, from a £2.4bn surplus in 2022, as the value of its assets fell faster than the estimated value of its liabilities.
Despite the shortfall, Tesco does not intend to contribute more to its pension plan, which closed to new members in 2015.
A spokesman for Tesco said the pension scheme was ‘in a strong position’, ‘well funded’ and ‘in surplus’ under a different metric used for calculating contributions.