Only 23 of the FTSE 100 companies are still providing defined benefit schemes to a significant number of employees, research from JLT Employee Benefits has found.
Its survey found that 58 of FTSE 100 companies were providing more than a handful of current employees with DB schemes, although the research said that proposals to liberalise pensions announced in the Budget earlier this year have made DC pensions more appealing to employees and corporates.
JLT estimated that allowing for the impact of changes in assumptions and market conditions, the reduction in ongoing DB pension provision totalled 7 per cent in the past 12 months.
Meanwhile, it also found a number of companies were reporting significant individual changes to investment strategies.
Seven FTSE 100 companies changed their bond allocations by more than 10 per cent.
This was led by British Gas Group, which saw a 22 per cent switch to bonds, and Babcock International, which saw a 21 per cent switch. In total 59 FTSE 100 companies have more than 50 per cent of their pension scheme assets in bonds.
The total deficit in FTSE 100 pension schemes was £60bn as of 30 June 2014, a reduction of £20bn from 12 months previously.
This improvement occurred despite the total deficit funding decreasing to £7.7bn in the year to 30 June 2014 from £8.8bn in the previous year.
| Liabilities |
| In the past 12 months, the total disclosed pension liabilities of the FTSE 100 companies rose from £533bn to £577bn. Fifteen companies have disclosed pension liabilities of more than £10bn. The largest of these continues to be Royal Dutch Shell, with £54bn. A total of 19 companies have disclosed pension liabilities of less than £100m, of which 13 companies have no DB pension liabilities. |
Source: JLT
Charles Cowling, director of JLT Employee Benefits, said: “The key to addressing this huge shortfall will be strengthened covenants and the successful implementation of the Pension Regulator’s new funding code.
“Clearing deficits as quickly as the company can afford to, without irreparably damaging the sponsor’s growth and investment plans, along with its long-term ability to contribute to the pension scheme, will be the challenge of both companies and trustees.”
Adviser view:
Scott Mullen a director, adviser and founder of South Yorkshire-based My Pension Expert, said: “The changes happening next year will be throwing up all kinds of issues. Not everyone in a defined benefit scheme will be best off staying in the scheme. The important thing is that trustees of the scheme let people know they need to seek independent financial advice.”
