Pensions - Articles - Closure of FTSE 100 pension schemes gathers pace


The trend for a decline in ongoing DB pension provision among FTSE 100 companies is gathering pace, according to research by JLT Employee Benefits. Ongoing DB pension provision have reduced by 13% to £7.2bn approximately in the 12 months to 30 June 2015, after allowing for the impact of changes in assumptions and market conditions.

 Only 55 FTSE 100 companies are still providing more than a handful of current employees with DB benefits, ignoring companies incurring ongoing DB service costs of less than 1% of total payroll. Of these, less than a quarter of the FTSE 100 companies (23) 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.
  
 The total deficit of FTSE 100 pension schemes has plunged to £78 billion, a deterioration of £19 billion over the year to 30 June 2015. Meanwhile, their total disclosed pension liabilities have risen from £577 billion to £614 billion.
  
 There continues to be significant funding of pension deficits. Last year saw total deficit funding of £6.3 billion, down from £6.9 billion the previous year. BT led the way with a deficit contribution of £0.8 billion (net of ongoing costs), but 54 other FTSE 100 companies also reported significant deficit funding contributions in their most recent annual report and accounts.
  
 There are a number of companies reporting very significant individual changes to investment strategies. Eleven FTSE 100 companies changed their bond allocations by more than 10%. The average pension scheme asset allocation to bonds has increased from 55% to 59%.
  
 There are a significant number of FTSE 100 companies of which the pension scheme represents a material risk to the business.
  
 Five FTSE 100 companies have total disclosed pension liabilities greater than their equity market value. For International Airlines Group, BAE Systems and RSA, total disclosed pension liabilities are almost double their equity market value.
  
 Only 25 companies disclosed a pension surplus in their most recent annual report and accounts; 63 companies disclosed pension deficits.
  
 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 £62 billion. A total of 19 companies have disclosed pension liabilities of less than £100 million, of which 12 companies have no defined benefit pension liabilities.
  
 Charles Cowling, Director, JLT Employee Benefits, comments: “We are seeing increasing evidence of the closing down of the UK’s Private Sector DB pension schemes. Even amongst FTSE100 companies, fewer and fewer are providing DB benefits to employees. Tesco, United Utilities and the Royal Mail are just a few more major employers recently looking to close the doors of their DB schemes to all employees for future benefit accrual.
  
 “Changes in investment strategies also support this trend, with increasing evidence of end-game planning as LDI, pension buyouts and de-risking of pension schemes all become more prevalent.
  
 “All this comes against a backdrop of significant reforms in UK pensions. Tax changes and the end of contracting-out, as well as soaring costs, are encouraging employers to look elsewhere when designing remuneration strategies for employees. Sadly, this does not bode well for long term retirement savings in the UK.”
  

Back to Index


Similar News to this Story

Wish list for the occupational pensions industry in 2025
As one year closes and another begins, it's an opportune moment to set our sights on the future. The UK occupational pensions industry faces nume
PSIG announces outcome of Consultation
The Pensions Scams Industry Group (PSIG), which was established in 2014 to help protect pension scheme members from scams, today announced the feedbac
Transfer values fell to a 12 month low during November
XPS Group’s Transfer Value Index reached a 12-month low, dropping to £151,000 during November 2024 before then recovering to its previous month-end po

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.