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

01 November 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 October 2016, JLT estimates the total DB pension scheme funding position as follows:

At 31 October 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£590bn

£763bn

(£173bn)

77%

FTSE 350 Companies

£667bn

£864bn

(£197bn)

77%

All UK Private Sector Pension Schemes

£1,429bn

£1,876bn

(£447bn)

76%

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

At 31 October 2015

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£537bn

£606bn

(£69bn)

89%

FTSE 350 Companies

£606bn

£686bn

(£80bn)

88%

All UK Private Sector Pension Schemes

£1,227bn

£1,459bn

(£232bn)

84%

Charles Cowling, Director, JLT Employee Benefits, comments: 

“This last month has seen an easing in deficits from the record heights of over £500 billion recorded at the end of August. But deficits have still doubled over the last 12 months and there appears no relief in sight for companies with large pension schemes. Some have argued that in light of unprecedented market conditions, there should be a review of how pension deficits are calculated. But this misses the key point that the size of the problem we face today is the inevitable consequence of a regulatory system that is looking to guarantee that members’ benefits are paid. If we want those guarantees, and it would take a brave politician to seek to remove them or water them down, then we have to accept that they are very expensive. Simply changing the method of measurement solves nothing.

“So what can trustees and companies do? Well, difficult problems require creative solutions. There are no easy answers, but pension schemes can make life easier by following a three point plan:

  1. Taking every opportunity in volatile markets to reduce risk at an acceptable price. This may mean close, possibly even daily, monitoring of pension scheme assets and liabilities and, using triggers, looking for opportunities to take advantage of favourable pricing.
  2. Looking at all options to reshape liabilities and settle liabilities through member exercises, such as the payment of transfer values that can ease the burden of pension schemes deficits and give members valuable options.
  3. Implement an integrated risk management framework that takes advantage of alternative ways of providing security to pension scheme members. For example, where there is a strong employer then it is reasonable that the employer be allowed to take more risk, and get more relief, in the funding and investment strategy, through a longer recovery period. Similarly if it is possible for the employer to provide alternative security to pension scheme members this may allow some relief from the otherwise inevitable demands for significant hikes in funding contributions.

“Companies and trustees should leave no stone unturned in their search for less costly ways of ensuring that members get their promised benefits without massively disadvantaging shareholders.”

- 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:

Emily Cullen | T: +44 (0)20 7903 0641| E: ecullen@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