30 August 2016

A Half-yearly Report from JLT Employee Benefits as at 30 December 2015


  • The total deficit in FTSE 250 pension schemes at 31 December 2015 is estimated to be £11 billion. This is an improvement of £1 billion from the position 12 months ago.

  • Only 48 FTSE 250 companies are still providing more than a handful of current employees with DB benefits (i.e. ignoring companies who are incurring ongoing DB service costs of less than 1% of total payroll). Of these, only 11 companies (i.e. just 5% of the FTSE 250) are still providing DB benefits to a significant number of employees (defined as incurring ongoing DB service cost of more than 5% of total payroll).

  • There continues to be significant funding of pension deficits and this at a time when most companies have precious little spare cash. Last year saw total deficit funding of £1.22 billion, down from £1.4 billion the previous year. John Laing Group led the way with a deficit contribution of £126 million, but 35 other FTSE 250 companies also reported significant deficit funding contributions in their most recent annual report and accounts.

  • The decline in ongoing DB pensions continues. We estimate that after allowing for the impact of changes in assumptions and market conditions, the underlying reduction in ongoing DB pension provision is 4% in the last 12 months.

  • The average pension scheme asset allocation to bonds is 55%, an increase on last year’s figure of 52%. This compares to 48% five years ago. In 11 companies, pension scheme asset allocation to bonds has changed by more than 10%.

  • There are a significant number of FTSE 250 companies where the pension scheme represents a material risk to the business. Nineteen FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. For FirstGroup, total disclosed pension liabilities are almost four times their equity market value.

  • Only 37 companies disclosed a pension surplus in their most recent annual report and accounts; 95 companies disclosed pension deficits. However, we estimate that 40 companies would disclose a surplus if they had a yearend of 31 December 2015.

  • In the last 12 months, the total disclosed pension liabilities of the FTSE 250 companies have increased from £71 billion to £86 billion. A total of 27 companies have disclosed pension liabilities of more than £1 billion, the largest of which is FirstGroup with disclosed pension liabilities of £4.91 billion. A total of 153 companies have disclosed pension liabilities of less than £100 million, of which 118 companies have no defined benefit pension liabilities.

  • If pension liabilities were measured on a “risk-free” basis rather than using a AA bond discount rate, the total disclosed pension liabilities of the FTSE 250 would increase from £86 billion to around £105 billion, and the total deficit at 31 December 2015 would be over £25 billion.

    The appendix at the end of this report contains a full list of all the FTSE 250 companies analysed and their relevant pension disclosures.

The full report contains the following sections including commentary:

Funding Position| Investment Mismatching| Size Of Pension Scheme| Significance Of The Pension Scheme In The Boardroom| Impact Of The Pension Scheme On The Company’s Share Price| Contributions Paid Into Pension Schemes| Appendix

Download the full report here.

contact Charles Cowling
Director 0161 242 5388