UK - Tesco has revealed its pension deficit increased to £1.1bn (€1.2bn) by the end of February 2009, so the firm has pledged £500m of property to the scheme as contingent assets in a bid to improve its financial security.

Figures published in the retailer's preliminary results for 2008/09 showed the last triennial valuation for 31 March 2008 highlighted a "small deficit" of £275m, leading to an increase in both member and company contributions of an average of 0.7% of salary.

However, an updated valuation to the end of February 2009, using the IAS19 methodology of calculating liabilities and assets against the yield from high-quality corporate bonds, confirmed the pension deficit had increased to £1.1bn on a post-tax basis, up from £600m in February 2007.

Figures from the preliminary results also showed the deficit in the DB scheme, on a pre-tax basis, had increased from £838m to £1.49bn between February 2008 and 2009, although the report noted the mortality assumptions for the scheme had been strengthened to incorporate medium cohort improvements with a minimum improvement of 1% per year.
 
Tesco said the deficit increase "has been driven mainly by falls in capital markets and other asset classes, although the deficit is similar to the level reported at our interim results".

In addition to higher contribution rates, the company confirmed it has also granted the trustees of the defined benefit (DB) scheme £500m of contingent assets, in the form of property, "to further improve the security of the scheme for members".

Tesco added the DB scheme is "an important part of our competitive benefits package, which helps Tesco recruit and retain the best people".