Pension scheme liabilities at a UK household name fund manager are being targeted with a view to being closed by 2020, according to the company’s latest interim report.
Fund manager Henderson, which reported a £2bn outflow, particularly from its UK commercial property funds immediately post-Brexit, has pledged to shore up its pension scheme liability.
Pension payments last a long time and over 30 years a lot can change, which is why it makes sense to make deficits good within a reasonable time frame Laith KhalafIn its 29-page interim report, the fund management group committed to funding additional contributions from January 2017 to plug the gap.
The interim report showed the Henderson Group Pension Scheme 2014 triennial valuation recorded a surplus on an accounting basis, but on the 2014 technical provision basis, it showed a £29m deficit.
According to the report: “As a result, Henderson has agreed with the trustee to fund additional contributions, commencing in January 2017, to remove the deficit.
“The contribution will be £8.4m a year and spread out over four years to the end of 2020.
“These payments will be made out of cash resources but will not affect the consolidated income statement.”
Latest figures from the Pension Protection Fund - set up as a safety net for companies struggling to meet scheme liabilities - showed there were 4,995 schemes in deficit and only 950 schemes in surplus.
In May, JLT Employee Benefits revealed there was a total £310bn deficit across all UK private sector pension schemes when taken as an industry average.
At 31 May 2016 | Assets | Liabilities | Surplus / (Deficit) | Funding Level |
FTSE 100 Companies | £552bn | £652bn | (£100bn) | 85% |
FTSE 350 Companies | £624bn | £738bn | (£114bn) | 85% |
All UK Private Sector Pension Schemes | £1,263bn | £1,573bn | (£310bn) | 80% |
Source: JLT Employee Benefits
According to Laith Khalaf, senior analyst for Bristol-based Hargreaves Lansdown, the demise of companies such as BHS and the ensuing furore over its pension funding have necessitated a long, hard look at corporate pension schemes.
He said: “There are plenty of big blue chip firms with large pension deficits out there who need to put their house in order.
“At the moment these companies might look like they have virtually no risk of going under, but pension payments last a long time and over 30 or 40 years a lot can change, which is why it makes sense to make deficits good within a reasonable time frame.”
Schroders, which also reported fund outflows of £2bn in its 2016 interims, has a fully funded UK retirement benefit scheme. The interims showed it had a surplus of £145.2m as at June 2016, compared with December when it stood at £115.4m.
It does have some small overseas schemes, which are in a slight deficit. According to the report, these overseas retirement benefit scheme liabilities had risen £3m, from £8.2m at the end of June 2015 to £11.2bn at the end of June 2016.
Meanwhile, Lloyds - which owns life and pension provider Scottish Widows - reported its own defined benefit pension scheme was in surplus.
In its statement to the markets yesterday morning (28 July), Lloyds’s half-year results revealed underlying profits fell 5 per cent - or 2 per cent if one excludes TSB, which Lloyds spun off in 2013.
The revelation of the high-street bank’s surplus came at the same time as Lloyds announced the closure of an additional 200 branches and 3,000 job losses by the end of 2017.
Its total number of employees has already fallen to 74,117 from 75,306 as at the end of December 2015.
