JLT EB Funding Level Update January 2015

31 January 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 January 2015, JLT estimates the total DB pension scheme funding position as follows:

At 31 January 2015  Assets  Liabilities  Surplus/ (deficit)  Funding Level
 FTSE 100 Companies  £565bn  £6663bn  (£98bn)  85%
 FTSE 100 Companies  £639bn  £751bn  (£112bn)  85%
 All UK Private Sector Pension Schemes  £1,274bn  £1,563bn  (£289bn)  82%

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

 At 31 January 2014  Assets  Liabilities  Surplus/ (deficit)  Funding Level
 FTSE 100 Companies  £505bn  £567bn  (£62bn)  89%
 FTSE 100 Companies  £570bn  £641bn  (£71bn)  89%
 All UK Private Sector Pension Schemes  £1,125bn  £1,295bn  (£170bn)  87%

Charles Cowling, Director, JLT Employee Benefits, comments:

“We thought the year end numbers at the end of 2014 looked difficult, but January has seen interest rates fall even lower and as a result pension deficits rise even higher. It is quite remarkable to note that in January the yield on AA bonds (which is the measure generally used for assessing pension liabilities in company accounts) fell below 3% per annum – a fall of nearly 1.5% in the last year. Across all UK defined benefit (DB) pension schemes, the total deficit (on the IAS19 accounting basis) has grown in the last 12 months by more than £110bn to a staggering £290bn.     “The even lower interest rates we now see in the UK could prove particularly problematic for pension schemes with actuarial valuations in 2015 - typically the actuarial valuation takes place every 3 years and this is when decisions are made on deficit funding. BT Group plc have just announced a massive additional pension deficit funding of £1.5billion. This is probably a sign of what lies ahead for many companies – particularly those with imminent actuarial valuations. “It’s easy to want to believe in mean reversion in markets. Many pension scheme trustees and company finance directors are hoping or relying on interest rates returning to long term norms to solve their pension woes. But what is “normal” in markets distorted by QE? And will we ever return to it (whatever it is)? Only this week Andy Haldane, the Chief Economist of the Bank of England, said that the central bank is “in no rush to raise” interest rates and that even when rates do rise they may settle at a “new normal” of just “2% or 3%, maybe 4%”. “Moreover, it’s quite possible for interest rates to go even lower (and pension liabilities go even higher) – as can be seen across Europe. In Germany 10 year Government Bond rates are just 0.3%, in Switzerland they are negative! 2015 looks like being a very difficult year for companies with large pension liabilities.”

- ENDS -

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.jltgroup.com/eb

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