JLT EB Funding Level Update May 2015

31 May 2015

Latest Monthly Update

JLT EB has updated its monthly index, showing the funding position of all UK private sector defined benefit (DB) pension schemes under the standard accounting measure (IAS19) used in company reports and accounts.

As at 31 May 2015, JLT estimates the total DB pension scheme funding position as follows:

At 31 May 2015  Assets  Liabilities  Surplus/ (deficit)  Funding Level
 FTSE 100 Companies  £557bn  £639bn  (£82bn)  87%
 FTSE 100 Companies  £630bn  £723bn  (£93bn)  87%
 All UK Private Sector Pension Schemes  £1,281bn  £1,540bn  (£259bn)  83%

For comparison, the corresponding figures as at 31 May 2014 are as follows:

 At 31 May 2014  Assets  Liabilities  Surplus/ (deficit)  Funding Level
 FTSE 100 Companies  £522bn  £579bn  (£57bn)  90%
 FTSE 100 Companies  £587bn  £653bn  (£66bn)  90%
 All UK Private Sector Pension Schemes  £1,169bn  £1,340bn  (£171bn)  87%

Charles Cowling, Director, JLT Employee Benefits, comments: 

“This month has seen an unexpected outright victory by the Conservative Party in the UK General Election, which was good news for the business climate. However, the structural problems of UK pension schemes remain a major barrier to the recovery for many UK companies. The total pension deficit in FTSE100 companies rose by £25billion in the last 12 months to £82billion and for all UK Private Sector pension schemes, the rise in the total pension deficit is an eye-watering £88billion, resulting in a total current deficit of £259billion. 

“The reasons for these deficits are well known - increased longevity, low interest rates and nervous markets - but they are not going away. Indeed this month saw UK inflation go negative for the first time in living memory. This may be good for the pockets of individual consumers, but it is not good news for pension schemes. Pension payments are frequently linked to increase in line with inflation – but Pension Schemes cannot reduce pensions if inflation is negative. With deflation, pensions payments exceed inflation and hence result in extra costs. In addition, in a deflationary environment, the long expected rise in interest rates and the resulting relief for pension schemes will be likely further delayed.  

“Whilst a Tory victory was welcomed by markets, there is already nervousness around the referendum on the UK’s membership of the EU. The possibility of a UK exit from the EU is not going to help matters. “We may therefore see high pension deficits remain a feature for much of this next Tory Government. There is a lot of focus on the new “freedom and choice” reforms to pensions to see if the opportunity for members to cash in their pension will provide some relief for pension schemes. Many companies are hoping to see pension liabilities reduce as members transfer their pensions out of their company scheme, but this hasn’t materialised so far due to the significant regulatory hurdles. So, 2015 looks like being another tough year for pension schemes.”

- ENDS -

At 31 July 2014

Notes to Editors 

Enquiries:

Smithfield Consultants:

Fay Israsena

fisrasena@smithfieldgroup.com

+44 (0)20 7903 0633

Julia Cooke

jcooke@smithfieldgroup.com  +44 (0)20 7903 0674&

About JLT Employee Benefits

JLT Employee Benefits is one of the UK's leading employee benefit providers offering a wide range of benefit and pension services, including administration, actuarial and pension consultancy, investment, Self Invested Personal Pensions (SIPPs) and Small Self Administered Schemes (SSASs) administration, flexible benefits, healthcare, benefit communication and financial education.

JLT Employee Benefits employs over 2,200 professionals throughout the UK and in 2013 had revenues of £172m in UK & Ireland.

Pensions and employee benefits companies within the JLT Employee Benefits group of companies include: JLT Benefit Solutions Ltd, Profund Solutions Limited, JLT Wealth Management Limited, JLT Investment Management Limited and Independent Trustee Services Limited. JLT Employee Benefits is part of Jardine Lloyd Thompson Group plc. www.jltemployeebenefits.com

About Jardine Lloyd Thompson Group plc

Jardine Lloyd Thompson is one of the world's largest providers of insurance and employee benefits related advice, brokerage and associated services. JLT's client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT is quoted on the London Stock Exchange and owns offices in 39 territories with some 9,000 employees. Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries.

www.jlt.com/
contact Charles Cowling
Director charles_cowling@jltgroup.com 0161 242 5388