Summary Funding Statement 2023

How is it done?

Imagine the Sainsbury’s Section as a big tank full of money. We need to make sure there’s likely to be enough money in the tank to pay all the future pensions.

There’s a tap with money coming in (contributions paid in by Sainsbury’s, if any are due, as well as the money we make from our investments). There’s also a tap with money going out to pay pensions and the costs of running the Scheme.

We get an actuary to check the tank and make sure there’s enough in there – not just to pay pensions now but also in 40, 50 or even 60 years’ time. But they don’t have a crystal ball, so how much is ‘enough’?

The actuary makes lots of estimates about the future, like future inflation, investment returns and on average how long people will live. These estimates about the future are then discussed between the Trustee and Sainsbury’s. When they have been agreed, the actuary completes the calculation of the amount estimated to be needed in the tank.

The actuary then looks at how much money, made up of all the assets and investments, is in the Sainsbury’s Section at the date of the valuation. They then compare it to how much is needed now to pay all the benefits in the future.

The result tells us, the Trustee, if there’s a shortfall. If so, the Trustee and Sainsbury’s have to agree how to fill the shortfall. This is done every three years when any changes over that time are considered.

What happens now?

After the 2018 funding valuation, the Trustee and Sainsbury’s set up an asset-backed contributions (ABC) arrangement to help remove the shortfall. This arrangement uses rent from Sainsbury’s stores to make payments into the Scheme. In 2021, these payments to the Sainsbury’s Section stopped because it was fully funded; however, now that there is a gap, when the Argos Section of the Scheme reaches its funding target, some of the contributions that come from the ABC structure will again be paid to the Sainsbury’s Section, which will help to further support the Scheme’s funding position.

What happens if Sainsbury’s goes out of business?

At each funding valuation, the actuary also estimates whether the Sainsbury’s Section would have enough assets to pay for all the promised pensions in the unlikely event that Sainsbury’s either wasn’t able to support the Sainsbury’s Section financially or became insolvent. At 30th September 2021, this showed the assets would cover 80% (2018: 75%) of the promised pensions. Since 2021, this position has improved, and we would also be able to access the property in the asset-backed contributions arrangement which would almost completely fill the gap.

The reason this is lower than the 2021 funding level shown above is because we would have to run the pension scheme differently – like an insurance company (which makes pensions more expensive to pay). The law says that we need to give you this information and we want to be completely open with you, which is why we’re telling you this, but please be assured that Sainsbury’s remains committed to supporting the Scheme as a whole and is a successful business.

In the very unlikely event that Sainsbury’s was unable to support the Scheme, the Pension Protection Fund (PPF), set up by the government, would protect your pension. You can find out more about the level of protection provided by the PPF at: www.ppf.co.uk

The Pensions Regulator

The Trustee also needs to tell you if the Pensions Regulator has used its powers in relation to the Scheme over the last year, for example, by changing the way future benefits build up, or the way the funding target is worked out, or amending the employer contribution rate. The Regulator hasn’t used its powers in relation to the Scheme.