Tesco PLC, Cheshunt, England, recorded a 10% increase in its group pension deficit to £3.1 billion ($3.8 billion) but plans to eliminate most of the shortfall with a one-time contribution.
Assets for the group's defined benefit funds grew 15.7% to £17.4 billion, while liabilities increased 14.8% to £20.5 billion, Tesco said in its annual report for the year ended Feb. 29.
The report said 92% of the group pension deficit was attributable to the U.K. Tesco Pension Scheme. That equates to about £2.8 billion.
Tesco will make a one-time £2.5 billion pension contribution "that is expected to significantly reduce the prospect of having to make further pension deficit contributions in the future," the report said. The grocery firm plans to fund the deficit contribution through the sale of its Thailand and Malaysia operations, announced March 9. The £8 billion sale is expected to be completes in the second half of this year, subject to regulatory and shareholder approval.
The one-time payment is in addition to an already agreed-upon £300 million contribution for the 2020-2021 financial year.
The trustees of the U.K. pension fund have agreed to the contribution, the report said.