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

02 January 2018

2017 – Is this the year when pension schemes finally turned the corner?

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 December 2017, JLT estimates the total DB pension scheme funding position as follows:

At 31 December 2017

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£688bn

£729bn

(£41bn)

94%

FTSE 350 Companies

£777bn

£829bn

(£52bn)

94%

All UK Private Sector Pension Schemes

£1,624bn

£1,774bn

(£150bn)

92%

For comparison, the corresponding figures as at 31 December 2017 are as follows:

At 31 December 2016

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE 100 Companies

£661bn

£716bn

(£55bn)

92%

FTSE 350 Companies

£746bn

£814bn

(£68bn)

92%

All UK Private Sector Pension Schemes

£1,538bn

£1,725bn

(£187bn)

89%

Charles Cowling, Director, JLT Employee Benefits, comments:

“2017 was a turbulent year for pension schemes but one with many positives. Markets were strong in the face of considerable political uncertainty and we have, finally, signs that interest rates are on the way up. Additionally, the latest mortality analysis points to a slowing down in the rate of increasing longevity. All of this is good news for pension scheme deficits which have shown some significant improvement over the past year.

“As IAS19 deficits are falling, so too are buy-out deficits. At JLT we are seeing strong evidence that the pension buy-out market is showing signs of taking off – as competition between insurers is hotting up and prices are getting keener. With over £12bn of deals transacted in 2017, all the signs point to an even stronger year in 2018, where it is possible that up to £30bn of deals could be transacted.

“At the same time we are now seeing some of the UK’s largest pension schemes closing to all future benefits – following the path that smaller pension schemes have been treading right across the private sector for over 10 years now. Tesco, Royal Mail and the Universities Superannuation Scheme have just closed, or are closing their doors, to existing members as well as new members. Combined with the increasing number of DB pension schemes looking to exit entirely through buy-outs, this now means that DB schemes are clearly disappearing from the private sector in the UK. When the regulations came into existence some 12 years ago that saw the creation of the Pension Protection Fund (PPF) there were 7,800 private sector pension schemes covered by the PPF. We have lost nearly one third of these pension schemes and we predict that by 2020 there will be less than 5,000 private sector pension schemes left in the UK.

“To pinch a famous quote from Winston Churchill – ‘Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning’. It will still be many years yet before UK plc can afford to settle all of its DB pension liabilities, but we are now clearly on the path to full and final settlement.”

- ENDS -

In a whitepaper published last year year, 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:

Emily Cullen | T: +44 (0)20 3047 2530| E: ecullen@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 2015 had revenues of £167.4m 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 141 countries.

www.jlt.com


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