Tesco to take pension scheme in-house to cut dependence on consultants

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Tesco, the world’s number three retailer, is to manage its pension scheme, one of the largest in the country still offering final-salary benefits, to maximise returns and cut dependence on consul- tants.

Tesco Pension Investment, which has received approval from the Financial Services Authority, will be led by Steven Daniels, previously group chief investment officer of LV= Asset Man- agement.

“We are building a high-calibre in-house team to help manage our growing scheme and reduce dependence on external providers,” Lucy Neville-Rolfe, executive director of corporate and legal affairs at the group said yesterday.

The long-term investment strategy and management of the scheme’s £6bn assets, covering over 170,000 employees will remain the ultimate responsibility of The Pension Trustees.

Tesco, one of only four FTSE 100 companies that is still offering a final salary scheme, is consulting on changes to its pension scheme announced in March.

It became one of the first major British companies to propose changing the retirement age to 67 from 65.

It also plans to switch the way it calculates inflation on its pension assets using the consumer prices index (CPI) instead of the retail prices index (RPI).

The CPI excludes inflation measures such as house prices and, as such, could lead to a 20 per cent reduction in retirement income, Hargreaves Lansdown estimated.

A combination of rising life expectancy and widening deficits has made it more onerous for companies to continue funding defined benefit schemes.

It is not the first time pensions schemes have moved in- house.

Barclays set up a similar FSA-registered investment arm, Oak Pensions Asset Management in 2010 as did the Universities Superannuation Scheme last year.

Tesco, battling to recover from a shock profit warning for 2012/13, slashed expansion plans for its UK business in April and said that it would spend over £1bn improving stores and online shop- ping.