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

01 July 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 30 June 2016, JLT estimates the total DB pension scheme funding position as follows:

At 30 June 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£576bn

£693bn

(£117bn)

83%

FTSE 350 Companies

£650bn

£784bn

(£134bn)

83%

All UK Private Sector Pension Schemes

£1,340bn

£1,681bn

(£341bn)

80%

For comparison, the corresponding figures as at 30 June 2015 are as follows:

At 30 June 2015

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£537bn

£612bn

(£75bn)

88%

FTSE 350 Companies

£607bn

£693bn

(£86bn)

88%

All UK Private Sector Pension Schemes

£1,229bn

£1,470bn

(£241bn)

84%

Charles Cowling, Director, JLT Employee Benefits, comments:  “Pension scheme deficits have soared again to record levels, reaching almost £350 billion at the end of June, and putting even more pressure on beleaguered sponsoring companies. Equity markets may have recovered since last week’s vote to leave the EU but conditions are getting even more challenging for pension schemes, with even lower interest rates and prolonged uncertainty in the markets.

“Companies with actuarial valuations this year, and those adversely affected by the Brexit vote, will be hardest hit. Trustees may have little option but to demand significant increases in cash funding from companies.

“However, worsening pension deficits will not be universal. 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 strategies, often using derivatives to improve protection.

“The big question for those pension schemes that have little or no protection 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 interest rate rises - and have seen spiralling pension deficits as a result. But looking at interest rates globally it is not difficult to make the case that the next move in interest rates may (again) be downwards. Indeed, only yesterday the Governor of the Bank of England, Mark Carney, signalled that interest rates may be cut over the summer due to a worsening outlook for economic growth.

“By continuing a policy of not hedging interest rates, companies and trustees are effectively taking a large bet against the markets on interest rates. Shareholders may be asking, painful as it is, why are companies and trustees continuing to gamble with their money in this way.”

 - ENDS -

Notes to Editor

Enquiries:

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