UK retailer Tesco has chosen Legal & General Investment Management (LGIM) to run its new defined contribution (DC) pension fund despite its having established in-house asset management capability for its defined benefit (DB) fund.
LGIM said the Tesco Retirement Savings Plan had been in place since November last year, and already enrolled 200,000 members.
Emma Douglas, head of DC at LGIM, said the supermarket was looking for a partner able to administer what she believed was the largest single private sector pension fund.
“Tesco, which have supplemented our Master Trust board with a highly capable DC Governance Committee, needed access to a very diversified range of highly competitively priced assets, including infrastructure, private equity and emerging market debt, to help to meet the objective for their default strategy of optimising net risk-adjusted outcomes for members,” she said.
The supermarket chain is among the largest employers in the UK and announced in September last year that its DB fund would be replaced with a DC scheme, where contributions of 4-7% would be matched by the company.
The closure of the DB fund comes after the latest triennial valuation showed the deficit rising from £934m (€1.2bn) in 2011 to £2.8bn in 2014, with its financial statements showing a £3.9bn deficit on an IAS 19 basis.
A spokesman for Tesco did not directly respond when asked whether Tesco Pension Investment (TPI), the in-house asset manager set up in 2012 to oversee the company’s £10bn DB fund, had been considered as manager for the new DC arrangement.
At the end of the most recent financial year, TPI employed 38 staff, an increase of two employees over 2014.
For more on TPI’s approach to asset management, read IPE’s interview with CIO Steven Daniels
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