Pension funds

The Tesco PLC Pension Scheme is a defined benefit scheme with nearly 160,000 employed members and around 23,000 pensioners. Note 24 in the Report and Financial Statements sets out the Group’s pension arrangements in detail.

During the year ended 23 February 2008, the trustee board comprised nine directors including three nominated by the members. The Chairman of the Trustees is Mr R S Ager. Management of the assets is delegated to a number of independent fund managers. These fund managers have discretion to invest in shares of Tesco PLC providing they do not exceed the proportion of the shares in the total market.

Our award-winning defined-benefit pension scheme is an important part of our competitive package of pay and benefits, which helps Tesco recruit and retain the best people. We manage and fund our scheme on an actuarial valuation basis and, as at December 2007, the scheme was estimated to be broadly fully funded. As at February 2008, under the IAS 19 methodology of pension liability valuation, the Group pension deficit on a post-tax basis was £603m.

Pension risks

The Group’s pension arrangements are an important part of our employees’ overall benefits package especially in the UK. We see them as a strong contributor to our ability to attract and retain good people, our Group’s greatest asset. Since the implementation of IAS 19 there is a risk that the accounting valuation deficit (which is recorded as a liability on the Group Balance Sheet) could increase if returns on corporate bonds are higher than the investment return on the pension scheme’s assets. The Group has considered its pension risks and has taken action by reducing risk in its investment strategy.

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