JLT's monthly fund index update for the month of July 2016

01 August 2016

JLT Employee Benefits (JLT) 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 July 2016, JLT estimates the total DB pension scheme funding position as follows:

At 31 July 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£595bn

£731bn

(£136bn)

81%

FTSE 350 Companies

£672bn

£828bn

(£156bn)

81%

All UK Private Sector Pension Schemes

£1,391bn

£1,781bn

(£390bn)

78%

For comparison, the corresponding figures as at 31 July 2015 are as follows:

At 31 July 2015

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£547bn

£628bn

(£81bn)

87%

FTSE 350 Companies

£619bn

£711bn

(£92bn)

87%

All UK Private Sector Pension Schemes

£1,257bn

£1,512bn

(£255bn)

83%

Charles Cowling, Director, JLT Employee Benefits, comments:  “Pension scheme deficits have once again soared to record levels, increasing by over £135 billion in the last 12 months to £390 billion at the end of July. Markets may have recovered, following their initial dive, in the aftermath of the Brexit vote but conditions remain challenging for pension schemes. With hints of a rate cut on 4th August, at the next Bank of England’s meeting, it looks increasingly likely that record low rates are here to stay.

“Many pension schemes have already taken steps to match assets to liabilities, in an effort to protect themselves against adverse movements in bond yields. This has either been through significant increases in bond holdings or through the use of more sophisticated Liability Driven Investment (LDI) strategies, often using derivatives to improve protection. In today’s environment pension schemes cannot continue to follow the same strategies that have been used for the last 10 years.

“For those pension schemes that have little or no protection against movements in bond yields, the big question is whether they want to increase interest rate protection now that rates have fallen further to record lows. Instinctively, it will be difficult for trustees and companies to hedge interest rates at current levels when they have so far held off doing so in the hope of an interest rate rise – and have seen pension deficits increase as a result. By continuing a policy of not hedging interest rates, companies and trustees are effectively taking a large bet against the markets.

"In addition to this, there is also mounting pressure on the Pensions Regulator and pension scheme trustees to ensure sponsoring companies are using all of the levers available to them to reduce pension shortfalls. Companies with actuarial valuations this year will be hardest hit and trustees will likely have little option but to demand significant increases in cash funding from companies.”

 - ENDS -

Notes to Editor

Enquiries:

JLT Employee Benefits

Corinne Gladstone, PR Manager| T: +44 (0)20 7895 7705| E: corinne_gladstone@jltgroup.com

Smithfield Consultants:

Fay Israsena | T: +44 (0)20 7903 0633| E: fisrasena@smithfieldgroup.com

Raeesa Chowdhury | T: +44 (0)20 7903 0635| E: rchowdhury@smithfieldgroup.com

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