16 January 2017

A quarterly report from JLT Employee Benefits


  • The total deficit in FTSE 100 pension schemes at 30 June 2016 is estimated to be £117 billion. This is a deterioration of £42 billion from the position 12 months ago.
  • Only 54 FTSE 100 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 23 companies (i.e. less than a quarter of the FTSE 100) 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. Last year saw total deficit funding of £6.3 billion, up from £6.1 billion the previous year. BT led the way with a deficit contribution of £0.8 billion (net of ongoing costs), but 49 other FTSE 100 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 approximately 10% in the last 12 months.
  • There are a number of companies reporting very significant individual changes to investment strategies. Three FTSE 100 companies changed their bond allocations by more than 10%.
  • The average pension scheme asset allocation to bonds has increased from 59% to 61%. Ten years ago, the average bond allocation was only 34%.
  • There are a significant number of FTSE 100 companies where the pension scheme represents a material risk to the business. Eight FTSE 100 companies have total disclosed pension liabilities greater than their equity market value. For International Airlines Group, the total disclosed pension liability is more than triple its equity market value. For BAE Systems, Royal Bank of Scotland and Sainsbury, the total disclosed pension liabilities are almost double their equity market value.
  • Only 28 companies disclosed a pension surplus in their most recent annual report and accounts; 60 companies disclosed pension deficits.
  • In the last 12 months, the total disclosed pension liabilities of the FTSE 100 companies have fallen from £614 billion to £586 billion. Ten years ago, the total disclosed pension liabilities were £407 billion. A total of 16 companies have disclosed pension liabilities of more than £10 billion, the largest of which is Royal Dutch Shell with disclosed pension liabilities of £57 billion. A total of 21 companies have disclosed pension liabilities of less than £100 million, of which 12 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 100 would increase from £586 billion to £705 billion, and the total deficit at 30 June 2016 would be around £185 billion.

The appendix at the end of this report contains a full list of all the FTSE 100 companies analysed and their relevant pension disclosures.

The full report includes the following sections:

Funding position and commentary | Investment mismatching and commentary | Size of pension scheme and commentary | Significance of the pension scheme in the boardroom and commentary | Impact of the pension scheme on the company’s share price and commentary | Contributions paid into pension schemes and commentary | Appendix of full list of all the FTSE 100 companies analysed and their relevant pension disclosures

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Report authors:

Charles Cowling, Managing Director | T: +44 (0) 161 242 5388 | E:

Murray Wright, Consultant | T: +44 (0) 131 456 6868 | E:

contact Charles Cowling
Director 0161 242 5388