The value of Tesco’s pension fund has plunged by £9 billion and dived into deficit after a series of bets on supposedly ‘safe’ investments turned sour.
Tesco’s scheme, which looks after the nest eggs of 340,000 members, is the latest to come a cropper because of heavy exposure to so-called Liability Driven Investments (LDIs).
These were designed to match the assets of a pension plan, such as Government IOUs known as gilts, with its liabilities – the promise to pay future retirement benefits.
Deficit: Tesco’s scheme, which looks after the nest eggs of 340,000 members, is the latest to come a cropper because of heavy exposure to so-called Liability Driven Investments
But LDIs came unstuck last year when interest rates rose sharply, causing the price of gilts to plummet and leaving pension funds nursing hefty losses, which experts say may never be fully recovered.
The 42 per cent drop in Tesco’s assets to £13 billion is one of the largest to have been reported by a workplace scheme since turmoil engulfed the pensions industry last autumn.
This followed the former Chancellor Kwasi Kwarteng’s disastrous mini-Budget.
Tesco’s pension fund also swung into a £300 million deficit, from a £2.4 billion surplus in 2022, as the value of its assets fell faster than the estimated value of its liabilities.
Despite the shortfall, Tesco has no plans to pay more into its pension plan, which was 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 measure used for calculating contributions.
