Pensions

Our award-winning defined-benefit pension scheme is an important part of our competitive benefits package, which helps Tesco recruit and retain the best people.

Pension Funds

The trustees manage and fund our scheme on an actuarial valuation basis and, at our last valuation dated 31 March 2008, the scheme had a small deficit of £275m.

Following the valuation, member and company contributions increased and, to further improve the security of the scheme for members, the trustees were granted contingent property assets worth £500m.

As at February 2011, under the IAS 19 methodology of pension liability valuation, the scheme had a deficit on a post-tax basis of £1bn (last year £1.3bn). The fall in the deficit has been driven mainly by good asset returns and a reduction in liabilities for deferred members who benefits will now increase in line with statutory increases up to retirement based on the Consumer Price Index (CPI) instead of the Retail Price Index (RPI). Note 28 of the 2011 Annual Report and Accounts provides more information on our pension arrangements.

Pension risks

The Group’s pension arrangements are an important part of our employees’ overall benefits package. We see them as a strong contributor to our ability to attract and retain good people. Since the implementation of IAS 19 there is a risk that the accounting valuation deficit (which is recorded as a liability on the Group Balance Sheet) could increase if returns on corporate bonds are higher than the investment return on the pension scheme’s assets. The Group has considered this and has taken action by closely monitoring the level of risks within its investment strategy.