As at 30 September 2017, JLT estimates the total DB pension scheme funding position as follows:
Charles Cowling, Director, JLT Employee Benefits, comments: Despite a political backdrop which continues to be problematic, with concerns over North Korea and Brexit, amongst many; despite concerns over rising inflation; despite many market worries and woes; and despite Mark Carney saying this week that the Bank of England cannot be expected to solve every economic problem in the UK, the funding position of DB pension schemes is showing signs of positive improvement, after a traumatic few years.
“The total deficit in the pension schemes of FTSE100 companies is back below for £50billion and showing signs of heading even lower. This good news comes on the back of equity markets holding up well, inflation numbers that are as bad as some expected, longevity improvements slowing down and best of all (for pension schemes at least) a sign that at last interest rates may be on the rise again, after nearly 10 years of painful reductions.
“Still, some challenges remain. Pension schemes which are carrying out actuarial valuations in 2017 are likely to show bigger deficits than in 2014 and trustees will therefore be knocking on the finance director’s door asking ‘more please’.
“But, in another positive move for UK companies with DB pension schemes, the IASB met last week and decided to ‘perform further work to assess whether it can establish a more principles-based approach in IFRIC 14 for an entity to assess the availability of a refund of a surplus’. This means that the feared changes which could have seen tens of billions of pounds added to the pension liabilities showing in the balance sheets of UK companies has been postponed – for now. Trustees and finance directors may wish to take advantage of these slightly calmer waters to explore opportunities to offload and settle pension liabilities.”
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