The UK’s Premier Foods will receive a £33m ($42m) windfall after agreeing to suspend pension deficit contribution payments.

The Oxo, Homepride and Mr Kipling brands owner told investors today (6 March) it has reached an agreement with the RHM Pension Scheme trustees to suspend pension deficit contribution payments from 1 April.

“This suspension of future contributions is taking place earlier than originally expected, reflecting the strong performance of the pension scheme, following the segregated merger in June 2020,” it said.

As a result, Premier will benefit from £33m increased free cash flow for the financial year ending 29 March 2025 and it anticipates no further contributions to be payable after this date.

Duncan Leggett, Premier’s chief financial officer, said: “The further significant progress in the funding position of the pension scheme has enabled us to take another important step to expected full resolution of the Scheme by the end of 2026.

“This suspension of pension payments substantially increases the free cash flow available to us and presents us with enhanced capital allocation options to deliver on our growth ambitions. The scheme has reached this position following strong stewardship by the trustee over many years and we will continue to work collaboratively with them to further de-risk the scheme.”

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Administration costs associated with running the pension scheme of around £5m per year and the dividend match mechanism are “currently unchanged”, Premier said.

Premier Foods shares jumped 12.54% (£0.17.4p) to £156.2p in early trading today after the announcement was made, reaching a near-13-year high.

Analysts at Shore Capital said: “We view the announcement as another very important and welcome staging post for the full resolution of the RHM Pension Scheme.”

In January, Premier highlighted its “biggest ever” Christmas performance, helped by sales of mince pies, and emphasised it is “well on track to deliver against its previously raised profit expectations”.

In its Q3 to 30 December, group sales rose 14.4% year-on-year to £352.7m.