REAL ESTATE - Two of Britain’s most high-profile firms are to plug pension fund deficits with property assets.

BAE Systems says it plans to help plug its £2.4bn (€3.5bn) main pension fund deficit with £240m in property assets and £110m in cash. The property assets used to plug the gap will largely be in the office sector. They will not include industrial and specialised real estate.

“We had to address the actuarial deficit,” said spokesman Richard Coltart. “We’ve got a lot of property – and it’s good.”

Coltart explained the negative market reaction as a results-day reflex, but analysts such as JP Morgan’s Harry Breach described the size of the deficit as “a knock”.

According to Coltart, the reaction reflects the fact that trustees have yet to vote on a proposal that would share liability for the pension shortfall between BAE (60%) and its workforce (40%). The trustees’ decision is expected within weeks.

Meanwhile, both the firm and trade union Amicus hailed the deal as a “probable” model for future agreements – including those covering BAE’s smaller Royal Ordnance and Marconi pension funds. An earlier employee poll found 88% in favour of the main pension fund deal.

Retailer Sainsbury’s meanwhile said it would secure two commercial mortgage backed securities (CMBS) against 17 supermarkets to make a one-off payment of £350m into its pension fund.

The supermarkets – which represent around half the net value of Sainsbury’s supermarkets – have a combined value of £3.55bn. In a statement, CFO Darren Shapland said the move would enable the firm to retain ownership of the assets but would also give it “significant operational flexibility as we will have the right to substitute, withdraw or dispose of properties”.