// Tesco’s pension fund plunges £9bn in value and falls into a deficit due to heavy exposure to Liability Driven Investments (LDIs)
// LDIs were designed to match the assets of a pension plan through government gilts to cover any future liabilities
Tesco’s pension fund has fallen into a deficit after plunging £9bn following several ‘safe’ investments which turned sour.
The fund, which looks after the 340,000 pensions, is the latest to be impacted by exposure to Liability Driven Investments (LDIs), This is Money reported.
LDIs were designed to match the assets of a pension plan, such as Government IOUs known as gilts, to cover any future liabilities.
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However, these came unstuck last year after the Bank of England rose interest rates, resulting in the fall of the price of gilts and heavy losses for pension funds.
The supermarket giant’s assets sunk 42% to £13bn, marking one of the largest drops to be reported by a workplace scheme since last year’s change in interest rates.
The pension fund also swung from a £2.4bn surplus in 2022 to a £300m deficit due to the value of its assets falling faster than the estimated value of its liabilities.
A Tesco spokesman told the outlet the scheme was “in a strong position”, “well-funded” and “in surplus” under a different measure used for calculating contributions.
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