JLT's monthly fund index update for the month of May 2017

01 June 2017

Pension scheme deficits remain stable despite political uncertainty

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 May 2017, JLT estimates the total DB pension scheme funding position as follows:

At 31 May 2017

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£666bn

£729bn

(£63bn)

91%

FTSE 350 Companies

£756bn

£830bn

(£74bn)

91%

All UK Private Sector Pension Schemes

£1,602bn

£1,785bn

(£183bn)

90%

For comparison, the corresponding figures as at 31 May 2016 are as follows:

At 31 May 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£576bn

£634bn

(£58bn)

91%

FTSE 350 Companies

£658bn

£726bn

(£68bn)

91%

All UK Private Sector Pension Schemes

£1,352bn

£1,546bn

(£194bn)

87%

Charles Cowling, Director, JLT Employee Benefits, comments: 

“As Britain prepares to go to the polls, we note that pensions have not been a key battleground for the main political parties - or at least not the issues surrounding hard pressed defined benefit (DB) pension schemes in the private sector.

“However, for many companies the management of their DB pension liabilities is their single biggest headache. The Pensions Regulator, in its latest annual funding statement, just published, has highlighted the issue of fair treatment between pension schemes and shareholders. In particular, it has stated an expectation that where dividends are higher than deficit recovery contributions, it expects to see a ‘relatively short recovery period’. This is going to cause some tension in boardrooms and trustee meetings when it comes to agreeing how deficits revealed by 2017 actuarial valuations are going to be financed.

“This tension will not be eased by the continuing likelihood of the IASB (International Accounting Standards Board) making a technical amendment to the accounting standard IFRIC14, which has the potential to increase very significantly the liability that a company must show in its accounts for its DB pension scheme.

“So, while markets are calm at present and deficits are relatively stable, DB pension schemes still have much to worry companies and shareholders. Moreover, with a General Election and Brexit looming there is still the potential for markets to add to these woes. Companies would do well therefore to look for opportunities to decrease or settle DB liabilities. For those few companies still allowing employees to earn additional DB benefits, 2017 is likely to be the year that they finally pull plug on this once much treasured and ubiquitous employee benefit.”

- ENDS -

In a recently published whitepaper, JLT Employee Benefits has offered a number of recommendations to achieve what we believe would help to address those DB pension sustainability issues. If you’d like to request our whitepaper – please find a link here (JLT: How do we get out of this Pensions Black Hole?).

Notes to Editor

Enquiries:

JLT Employee Benefits

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

Smithfield Consultants:

Julia Cooke | T: +44 (0)20 7903 0631| E: jcooke@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 41 territories with some 10,600 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