Premier Foods has today announced a "landmark" pensions agreement, which will see its three pension schemes merged into a single trust.

It is expected to cause a “significant” reduction in the net present value of pension deficit contributions of up to 45 per cent, with a projected fall from £300-£320m to £175-£185m.

The merger of the three schemes, RHM, Premier Foods and Premier Grocery Products , represents a “much more secure future for the group’s pension scheme members”, with the shared funds resulting in a “vastly improved funding position”.

Whilst RHM is currently the only scheme of the three with a healthy surplus, upon buyout, any prospective surplus will be transferred to fund deficits in the remaining two schemes.

The firm argued that this would create “greater funding certainty” for scheme members, with those in the Premier Foods scheme benefiting in particular.

The group will also benefit from having their administrative costs halved, with the scheme expected to save approximately £4m per year, as well as having a “significant reduction in future pension deficit contributions”.

Whilst current pension deficit contributions stand at £38m per annum, the group has estimated that, subject to future valuations and investment performance, these could be lowered to as little as £17m per annum.

The merged scheme will also benefit from “certain rights" in the event of "any future potential transaction of major brands”, with the creation of a single trust also expected to bring stronger governance.

Furthermore, from a company perspective, the merger will see an improvised dividend matching arrangement, and will allow the existing upside sharing of trading profit, as agreed in 2017, to lapse.

Commenting on the agreement, Premier Foods Pension Scheme chair and LawDeb Pension Trustees managing director, Michael Chatterton, stated: “We firmly believe this new pensions agreement represents a more secure future for the group’s pension scheme members.

“When considering the challenges for the Premier Foods pensions schemes we took a holistic approach.

"This led us to consider how to leverage the scale and strong position of the RHM scheme for the benefit of the other scheme members as well as the company and its shareholders.”

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