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

01 September 2016

Latest index shows deficit for all UK private sector pension schemes has soared to over £500 billion.

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 August 2016, JLT estimates the total DB pension scheme funding position as follows:

At 31 August 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£613bn

£795bn

(£182bn)

77%

FTSE 350 Companies

£693bn

£900bn

(£207bn)

77%

All UK Private Sector Pension Schemes

£1,450bn

£1,952bn

(£502bn)

74%

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

At 31 August 2015

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£536bn

£612bn

(£76bn)

88%

FTSE 350 Companies

£606bn

£694bn

(£88bn)

87%

All UK Private Sector Pension Schemes

£1,217bn

£1,466bn

(£249bn)

83%

Charles Cowling, Director, JLT Employee Benefits, said: “On 1st June 2016, pre-Brexit, we noted that market conditions for pension schemes were getting ever more challenging and that the total deficit for all UK private sector pension schemes had reached record levels, breaking through the £300 billion mark. Now just 3 months later, post Brexit and after the latest round of Quantitative Easing from the Bank of England, the total deficit for all UK private sector pension schemes has soared to the dizzying heights of over £500 billion.

“At this level deficits are not affordable for UK companies. For companies with ballooning pension deficits on their balance sheet, we have already seen companies having to reassess whether they are still able to pay dividends to shareholders.

“To make matters worse it is likely that the deficits which pension scheme trustees are dealing with will be even greater than those recorded in company accounts – as trustees, under the encouragement of the Pensions Regulator, are required to make an even more prudent assessment of liabilities. Companies and trustees looking at 2016 actuarial valuations or anticipating 2017 actuarial valuations are looking at numbers, on the question of how to solve the deficit situation, which cannot be made to add up.

“In response to these soaring numbers, some have called for changes in how pension scheme liabilities are calculated. However, changing how we measure the problem will do nothing towards addressing the real causes of the problem. The real problem is that pensions have been promised, in part by the introduction of Government legislation, which can no longer be afforded. We are now faced with the situation where there are only difficult choices to be made. Uncomfortable as it may be, pension benefits could be reduced, e.g. by taking away pension increases; or pension benefits could be made less secure - making the possibility of individual loss greater in the event of an employer insolvency. Alternatively, we would need to see a very significant increase in employer contributions leading to substantial reductions in payments to shareholders. None of these choices will be particularly palatable but doing nothing is not an option.” 

-END-


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