Investment changes put Sainsbury’s pension fund at risk

Sainsbury’s is risking a shortfall in its pension fund through a change in its investment strategy, according to a pensions consultant.

The supermarket chain now invests 60 per cent of its assets in shares, which carry a higher risk, and 40 per cent in bonds.

The previous policy was to match the pension fund liabilities to investments in bonds, ensuring liabilities to retired workers were covered. The higher returns allowed Sainsbury’s to reduce its estimated deficit, and lower its contributions.

However, in a research note for RBC Capital Markets, John Ralfe suggests the retailer has underestimated the risk. He said the increased risk means the company should now be contributing £53m rather than the current £20m to the fund.

The concerns are raised ahead of Sainsbury’s chief executive Justin King’s review of the group, to be announced tomorrow.

He is expected to create around 3,000 new store jobs to focus on customer service and product availability, while reducing the head office count by around 700.

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