The Co-operative Group’s (Co-op) overall pension scheme surplus increased by £306m year-on-year to £1,859m, as of 5 January 2019, according to its annual financial results report.

It highlighted the increase of the interest rate used to discount and value the pension scheme liabilities, from 2.6 per cent to 3 per cent, as the main reason for the greater surplus.

Co-op's overall pension assets rising from £1,746m to £1,984m and its liabilities decreasing from £193m to £125m also played a significant part in the increased surplus.

The company’s largest pension scheme is the Co-operative Group Pension Scheme (Pace), which accounts for around 80 per cent of the company’s pension assets.

Pace has both DC and DB sections, with all new employees automatically enrolled into the DC section.

Co-op’s report stated: “The latest funding valuation of the Pace scheme, which is by far the largest scheme, was carried out at 5 April 2016. It showed a funding level of 103 per cent and a surplus of £251m.”

The company operates five DB pension schemes, all of which are closed to future accrual, including the Somerfield Pension Scheme, which concluded an insurance buy-in with Pension Insurance Corporation in January 2019.

Three of its DB schemes, United Norwest Co-operatives Employees' Pension Fund, Yorkshire Co-operatives Limited Employees' Superannuation Scheme and The Plymouth and South West Co-operative Society Limited Employees' Superannuation Fund, are in deficit.

However, its Pace and Somerfield Pension Scheme DB plans are in surplus.

The report added: “We don't pay any contributions into Pace because it is in surplus but we have some smaller schemes in deficit, into which we are currently paying £50m per annum.”

It also revealed a £24m gain arising from changes in expected pension benefits, although this was partially offset by a £13m charge for the cost of equalising guaranteed minimum pensions.

Furthermore, in November 2018, the Co-op pension trustees announced their decision to invest up to £50m into the social and affordable housing market over the next 12 months.

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