Pension schemes deficit

Sainsbury(J) PLC
24 February 2006





24 February 2006



J Sainsbury plc addresses pension schemes deficit



Highlights

•         Defined benefit schemes for existing members remain in place

•         Injection of £350 million into pension schemes (1) from proceeds of
          proposed refinancing

•         Annual deficit payments increased by £18 million to £38 million per
          annum

•         Proposed changes, agreed with trustees, expected to fund last reported
          deficit of £582 million (2)

•         Active members can choose to increase contributions by an average of 3
          per cent of pay to retain benefits, or choose to receive lower 
          benefits

•         Changes to members' future benefits to reduce schemes' liabilities



Sainsbury's has today announced that it is proposing to raise up to £2.07
billion of new secured debt of which £1.7 billion will be used to buy back its
unsecured bonds.  In conjunction with this the company has agreed with the
pension schemes' trustees that some of the new funds raised will be used to make
a one-off contribution of £350 million into its pension schemes.  This will be
made in two instalments, £150 million in March 2006 and £200 million in May
2006.   In addition, deficit payments will be increased by £18 million to £38
million per annum, with the first of these payments being made in March 2007.
These combined contributions are designed to fund Sainsbury's last reported
deficit calculated under IAS 19 as at 8 October 2005.  The proposed scheme cash
funding falls within the guidelines set out by the Pensions Regulator.  The
impact of these new pension arrangements on Sainsbury's underlying earnings is
expected to be broadly neutral.



In addition, to provide a more balanced sharing of risk and cost between members
and the company, it has been agreed with the pension schemes' trustees that for
active members:

•         there will be the choice to increase their contributions by an average
of 3 per cent of pay from September 2006 to retain benefits, or, to maintain or
reduce contributions and move to reduced benefit scales, and

•         future pension provisions will change so as to reduce the schemes'
liabilities, such as introducing further controls on early retirement and
withdrawing the automatic migration to a higher scale of benefits when members
are promoted.



Following consultation, the trustees will be reviewing the schemes' investment
strategies with the aim of reducing risk.



John Adshead, chairman of the pension schemes' trustee boards said, 'We welcome
today's refinancing announcement which facilitates the payment of £350 million
into the schemes and the plans to fund the last reported deficit (2).  Following
discussions with the company we believe that the agreement we have reached is a
fair balance between the needs and expectations of members and the financial
support provided by Sainsbury's to improve the funding of the schemes and
increase the security of benefits.'



Justin King, chief executive of Sainsbury's said, 'We are pleased that we have
been able to retain the defined benefit schemes for current members.  Today's
announcement demonstrates our commitment to our pension schemes by ensuring
appropriate funding levels.  The injection of £350 million and the increased
annual payments will fund the last reported deficit (2).  In addition the
increase in the members' contributions together with the changes to future
benefits will achieve a more appropriate and balanced sharing of cost and risk.'





Enquiries:

Investor relations                                     Media

[phone]                                   [phone]
Lynda Ashton                                           Pip Wood




A conference call will be held for analysts and investors at 10:30 (GMT) on
Friday 24 February 2006. To listen to this conference call: please dial +44 (0)
20 7365 1851 at least ten minutes prior to the start of the call. You will be
asked to give your name and company details.  You will then be placed on hold
and will hear music until the conference call starts.  A replay of this event
will be available from 14:30 GMT until midnight GMT on Wednesday 1 March 2006.
To listen, please dial [phone], and enter pin number 8489732. 
Please note that only members of the investment community will have the
opportunity to participate in the Q&A session. To listen to the audio webcast:
Please visit www.j-sainsbury.co.uk and follow the on-screen instructions. The
archive of this event will be available from 15:00 GMT on the day in the form of
a delayed webcast. To view the transcript of the conference call: Go to www.j-
sainsbury.co.uk on Tuesday 28 February 2006 and follow the on-screen
instructions.


Notes

(1)      Our proposals cover the J Sainsbury's Pension and Death Benefit Scheme
('Main Scheme') and the J Sainsbury's Executive Pension Scheme ('Executive
Scheme').  These schemes are closed to new members on 31 January 2002.

(2)     As at 8 October 2005, the schemes had assets of £3,266 million and
liabilities of £3,848 million on an IAS 19 basis, leaving a gross deficit of
£582 million.

(3)     All these arrangements are conditional upon the proposed refinancing
being completed.

(4)    Certain statements made in this announcement are forward looking
statements. Such statements are based on current expectations and are subject to
a number of risks and uncertainties that could cause actual results to differ
materially from any expected future results in forward looking statements.


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