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Pensions

Asda merger sparks pension concern

Asda merger sparks pension concern

Mona Dohle
Thursday 3rd May 2018

The proposed merger between supermarket giants Sainsbury's and Asda has sparked concerns over its impact on the former's pension scheme.

Frank Field, chair of the House of Commons Work and Pensions Committee, warned in a letter to Sainsbury’s executive Mike Coupe that the proposed merger raised questions over the provisions for Sainsbury’s defined benefit (DB) pensions scheme.

While the deal foresees that Walmart will assume responsibility for Asda’s pension scheme and the US firm holding a 42% share in the combined business, the effect on Sainsbury’s DB scheme remains to be clarified. As of March 2017, the scheme had a deficit of £974m, largely due to Sainsbury’s acquisition of Home Office Retail in 2016.

Field suggested that in addition to seeking approval from the Competition and Markets Authority, the Prudential Regulatory Authority and the Financial Conduct Authority, both parties should also seek clearance from The Pensions Regulator (TPR).

Coupe responded to the letter by stating that the proposed combined group would be responsible for one defined benefit pension scheme called the Sainsbury’s Pension Scheme, and that Home Office Retail’s fund had recently been merged into a separate section of the Sainsbury’s Pension Scheme to reduce the administrative burden.

A TPR spokesperson confirmed that the regulator was holding discussions with all parties involved in the proposed merger in a bid to secure the best possible outcome for members.

“We expect any business planning a major corporate transaction to identify if there is potential material detriment to a pension scheme and explain how they will mitigate against that detriment. They can then come to us for clearance to gain assurance that we will not use our anti-avoidance powers,” TPR said.

Meanwhile, trade union Unite demanded guarantees that there would be no job losses as a result of the proposed merger. Unite general secretary Len McCluskey warned: “Both supermarket giants have earmarked £500m in synergies from the merger, which from the bitter experience of our members means job losses at some point down the line.

“It is not just store workers who could be under threat from a drive to achieve ‘synergies’, but the thousands who work in distribution centres and logistics across the UK,” McCluskey stressed.

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