JLT's monthly fund index update for the month of July 2017

01 September 2017

Pension scheme deficits decrease

JLT Employee Benefits (JLT) has updated its monthly index, showing the funding position of all UK private sector defined benefit (DB) pension schemes under the standard accounting measure (IAS19) used in company reports and accounts.

As at 31 August 2017, JLT estimates the total DB pension scheme funding position as follows:

At 31 August 2017

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£685bn

£740bn

(£55bn)

93%

FTSE 350 Companies

£774bn

£842bn

(£68bn)

92%

All UK Private Sector Pension Schemes

£1,606bn

£1,805bn

(£199bn)

82%

For comparison, the corresponding figures as at 31 August 2016 are as follows:

At 31 August 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£658bn

£770bn

(£112bn)

85%

FTSE 350 Companies

£746bn

£878bn

(£132bn)

85%

All UK Private Sector Pension Schemes

£1,547bn

£1,887bn

(£340bn)

82%

Charles Cowling, Director, JLT Employee Benefits, comments: 

“Markets have been treading water against an ever-challenging political backdrop this month. As a result, IAS19 pension deficits, the deficit that is recorded in a company’s accounts, have drifted higher but these are still below levels seen last year.

“However, these figures do hide some pretty major problems. With (RPI) inflation numbers also rising, the real liabilities which pension schemes face look ever more challenging for some.

“This month has seen the massive British Steel Pension Scheme reach a long-anticipated agreement on its future. Tata Steel signed a Regulated Apportionment Arrangement with the trustees. This requires the company to pay an additional £550 million into the pension scheme, whilst the members have been asked to accept lower future pension increases. This is a stark reminder that real pension liabilities may be higher than are showing in some companies’ accounts. Those firms with pension schemes that are large relative to the size of the company  may be carrying pension risks they cannot afford.

“Indeed, those companies and pension schemes currently carrying out their 3-yearly actuarial valuation are likely to see significant increases in funding deficits and hence considerable demands for cash contributions.

“This possibility that the IAS19 position may understate the real pension liabilities could be exacerbated by new accounting changes which are currently being considered by the International Accounting Standards Board (IASB). This may appear a minor technical amendment to a part of the IAS19 standard (known as IFRIC 14) but it could result in tens of billions of pounds of additional liabilities being added to the balance sheets of UK companies.”

- ENDS -

In a recently published whitepaper, JLT Employee Benefits has offered a number of recommendations to achieve what we believe would help to address those DB pension sustainability issues. If you’d like to request our whitepaper – please find a link here (JLT: How do we get out of this Pensions Black Hole?).

Notes to Editor

Enquiries:

JLT Employee Benefits

Corinne Gladstone, PR Manager| T: +44 (0)20 7895 7705| E: corinne_gladstone@jltgroup.com

Smithfield Consultants:

Julia Cooke | T: +44 (0)20 7903 0631| E: jcooke@smithfieldgroup.com 

About JLT Employee Benefits

JLT Employee Benefits is one of the UK's leading employee benefit providers offering a wide range of benefit and pension services, including administration, actuarial and pension consultancy, investment, Self Invested Personal Pensions (SIPPs) and Small Self Administered Schemes (SSASs) administration, flexible benefits, healthcare, benefit communication and financial education.

JLT Employee Benefits employs over 2,200 professionals throughout the UK and in 2013 had revenues of £172m in UK & Ireland.

Pensions and employee benefits companies within the JLT Employee Benefits group of companies include: JLT Benefit Solutions Ltd, Profund Solutions Limited, JLT Wealth Management Limited, JLT Investment Management Limited and Independent Trustee Services Limited. JLT Employee Benefits is part of Jardine Lloyd Thompson Group plc.

www.jltemployeebenefits.com

About Jardine Lloyd Thompson Group plc

Jardine Lloyd Thompson is one of the world's largest providers of insurance and employee benefits related advice, brokerage and associated services. JLT's client proposition is built upon its deep specialist knowledge, client advocacy, tailored advice and service excellence.

JLT is quoted on the London Stock Exchange and owns offices in 41 territories with some 10,600 employees. Supported by the JLT International Network, it offers risk management and employee benefit solutions in 135 countries.

www.jlt.com


contact Charles Cowling
Director charles_cowling@jltgroup.com 0161 242 5388