THE FTSE 250 AND THEIR PENSION DISCLOSURES

03 April 2017

Cover of JLT FTSE 250 and their pension disclosures report released March 2017

This half-yearly Report from JLT Employee Benefits covers all FTSE250 companies. It includes analysis of all annual reports for years ending on or before the 30 June 2016 and published by 31 October 2016.

EXECUTIVE SUMMARY

  • The total deficit in FTSE 250 pension schemes at 30 June 2016 is estimated to be £11 billion. This is broadly unchanged from the position 12 months ago.
  • Only 44 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 13 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 £1.21 billion, down from £1.53 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.
  • 56 FTSE 250 companies could have settled their pension deficits in full with a payment of up to one year’s dividend, 12 companies would need a payment of up to two years’ dividends to settle their pension deficits in full and 23 companies would need a payment of more than two years’ dividends in order to settle their pension deficits in full.
  • The average pension scheme asset allocation to bonds is 54%, a decrease on last year’s figure of 56%. This compares to 48% six years ago. In 12 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. 20 FTSE 250 companies have total disclosed pension liabilities greater than their equity market value. For The Go-Ahead Group, total disclosed pension liabilities are more than four times their equity market value.
  • Only 41 companies disclosed a pension surplus in their most recent annual report and accounts; 91 companies disclosed pension deficits. However, we estimate that 24 companies would disclose a surplus if they had a year-end of 30 June 2016.
  • In the last 12 months, the total disclosed pension liabilities of the FTSE 250 companies have remained around the same level of £81 billion. A total of 26 companies have disclosed pension liabilities of more than £1 billion, the largest of which is FirstGroup with disclosed pension liabilities of £4.05 billion. A total of 156 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 £81 billion to around £100 billion, and the total deficit at 30 June 2016 would be around £30 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 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

Download the report

Report authors:

Charles Cowling, Managing Director | T: +44 (0) 161 242 5388 | E: charles_cowling@jltgroup.com

Murray Wright, Consultant | T: +44 (0) 131 456 6868 | E: murray_wright@jltgroup.com