24th Feb 2006 10:00
Sainsbury(J) PLC24 February 2006 24 February 2006 J Sainsbury plc addresses pension schemes deficit Highlights • Defined benefit schemes for existing members remain in place • Injection of £350 million into pension schemes (1) from proceeds of proposed refinancing • Annual deficit payments increased by £18 million to £38 million per annum • Proposed changes, agreed with trustees, expected to fund last reported deficit of £582 million (2) • Active members can choose to increase contributions by an average of 3 per cent of pay to retain benefits, or choose to receive lower benefits • Changes to members' future benefits to reduce schemes' liabilities Sainsbury's has today announced that it is proposing to raise up to £2.07billion of new secured debt of which £1.7 billion will be used to buy back itsunsecured bonds. In conjunction with this the company has agreed with thepension schemes' trustees that some of the new funds raised will be used to makea one-off contribution of £350 million into its pension schemes. This will bemade in two instalments, £150 million in March 2006 and £200 million in May2006. In addition, deficit payments will be increased by £18 million to £38million per annum, with the first of these payments being made in March 2007.These combined contributions are designed to fund Sainsbury's last reporteddeficit calculated under IAS 19 as at 8 October 2005. The proposed scheme cashfunding falls within the guidelines set out by the Pensions Regulator. Theimpact of these new pension arrangements on Sainsbury's underlying earnings isexpected to be broadly neutral. In addition, to provide a more balanced sharing of risk and cost between membersand the company, it has been agreed with the pension schemes' trustees that foractive members: • there will be the choice to increase their contributions by an averageof 3 per cent of pay from September 2006 to retain benefits, or, to maintain orreduce contributions and move to reduced benefit scales, and • future pension provisions will change so as to reduce the schemes'liabilities, such as introducing further controls on early retirement andwithdrawing the automatic migration to a higher scale of benefits when membersare promoted. Following consultation, the trustees will be reviewing the schemes' investmentstrategies with the aim of reducing risk. John Adshead, chairman of the pension schemes' trustee boards said, "We welcometoday's refinancing announcement which facilitates the payment of £350 millioninto the schemes and the plans to fund the last reported deficit (2). Followingdiscussions with the company we believe that the agreement we have reached is afair balance between the needs and expectations of members and the financialsupport provided by Sainsbury's to improve the funding of the schemes andincrease the security of benefits." Justin King, chief executive of Sainsbury's said, "We are pleased that we havebeen able to retain the defined benefit schemes for current members. Today'sannouncement demonstrates our commitment to our pension schemes by ensuringappropriate funding levels. The injection of £350 million and the increasedannual payments will fund the last reported deficit (2). In addition theincrease in the members' contributions together with the changes to futurebenefits will achieve a more appropriate and balanced sharing of cost and risk." Enquiries: Investor relations Media +44 (0) 20 7695 7162 +44 (0) 20 7695 6127Lynda Ashton Pip Wood A conference call will be held for analysts and investors at 10:30 (GMT) onFriday 24 February 2006. To listen to this conference call: please dial +44 (0)20 7365 1851 at least ten minutes prior to the start of the call. You will beasked to give your name and company details. You will then be placed on holdand will hear music until the conference call starts. A replay of this eventwill be available from 14:30 GMT until midnight GMT on Wednesday 1 March 2006.To listen, please dial +44 (0) 20 7806 1970, and enter pin number 8489732. Please note that only members of the investment community will have theopportunity to participate in the Q&A session. To listen to the audio webcast:Please visit www.j-sainsbury.co.uk and follow the on-screen instructions. Thearchive of this event will be available from 15:00 GMT on the day in the form ofa delayed webcast. To view the transcript of the conference call: Go to www.j-sainsbury.co.uk on Tuesday 28 February 2006 and follow the on-screeninstructions. Notes (1) Our proposals cover the J Sainsbury's Pension and Death Benefit Scheme("Main Scheme") and the J Sainsbury's Executive Pension Scheme ("ExecutiveScheme"). These schemes are closed to new members on 31 January 2002. (2) As at 8 October 2005, the schemes had assets of £3,266 million andliabilities of £3,848 million on an IAS 19 basis, leaving a gross deficit of£582 million. (3) All these arrangements are conditional upon the proposed refinancingbeing completed. (4) Certain statements made in this announcement are forward lookingstatements. Such statements are based on current expectations and are subject toa number of risks and uncertainties that could cause actual results to differmaterially from any expected future results in forward looking statements. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sainsbury's