DS Smith reveals £100m support for pension fund amid mini-budget market chaos

Packaging firm DS Smith has revealed it loaned its pension scheme up to £100 million to help it weather the stock market turmoil in the aftermath of the disastrous mini-budget.

In its half-year results, DS Smith said it made the cash funding available to its defined benefit pension fund “in anticipation of potential margin calls and latterly a liquidity facility”.

It came amid the market chaos that followed former chancellor Kwasi Kwarteng’s ill-fated mini-budget in late September, which sparked a rout in UK Government bonds and sent the pound plunging to an all-time record low against the US dollar.

The gilt sell-off, which caused yields on Government bonds to rise to multi-year highs, sparked a crisis across the pensions industry, bringing some funds to the brink of collapse.

Funds that used so-called liability-driven investments (LDI) – the strategies at the centre of the pension crisis – were forced into a fire sale of assets to meet margin calls, which left many scrabbling around to secure cash in a difficult market.

The Bank of England stepped in with emergency gilt buying action to ease the bond sell-off and help give pension funds some breathing space.

DS Smith confirmed that its pension fund did not need to draw on the funding in the end.

It said: “The cash advance was fully repaid within days of being made and as at 31 October 2022 the liquidity facility remained in place but was undrawn.”

But other pension funds have struggled since the mini-budget debacle, with BT’s £47 billion scheme reportedly set to call on the group for more cash support as it overhauls its use of LDIs in light of the gilt crisis.

DS Smith’s interim figures also showed the group posted a 79% constant currency hike in pre-tax profits to £315 million for the six months to October 31 after sales lifted 26%, while it said annual profits were set to beat expectations.

It is forecasting a second half as strong as the first, with the interim figures boosted by higher prices of cardboard boxes as well as cost control.