PensionsAug 30 2016

FTSE 250 DB contributions predicted to stop by end of year

twitter-iconfacebook-iconlinkedin-iconmail-iconprint-icon
Search supported by
FTSE 250 DB contributions predicted to stop by end of year

Just 5 per cent of FTSE 250 companies are still providing defined benefit payments to a “significant number of employees”, with contributions likely to stop “almost completely” by the end of 2016, according to JLT Employee Benefits.

The FTSE 250 index, which represents the second biggest cohort of companies listed on the London Stock Exchange after the FTSE 100, had just 11 companies contributing more than 5 per cent of their total payroll into DB schemes.

An additional 37 companies were contributing between 1 and 5 per cent of their total payroll on DB contributions.

Charles Cowling, director at JLT Employee Benefits said building product manufacturer Ibstock was the latest FTSE 250 company to announce plans to close its DB scheme to future accrual for all active members.

“The phrase ‘managed decline’ has become synonymous with the gradual phasing out of DB pensions and unfortunately this narrative may continue. It now appears likely that DB pension accrual in the FTSE 250 will be almost completely stopped by the end of the year,” said Mr Cowling.

JLT reported that at the end of 2015, FTSE 250 schemes had liabilities of £86 billion, a 21 per cent year-on-year increase. The total deficit, meanwhile, was £11 billion, up £1bn on the previous year. Ninety-five companies reported pension deficits, while just 37 reported surpluses.

The FTSE 250 company with the biggest surplus was inter-dealer money broker Tullett Prebon, which was 144 per cent funded. It was followed by Cineworld, Henderson, Ladbrokes and Investec.

The company with the biggest deficit was Al Noor Hospital Group, which was 0 per cent funded (it has since merged with Mediclinic International) followed by Micro Focus International, Vedanta Resources and Keller.

The report found total allocation to bonds had risen to 55 per cent. That was up from 52 per cent the previous year, and 48 per cent five years ago.

Dechra Pharmaceuticals, pub company Enterprise Inns, financial services firm Investec and “global workplace provider” Regus were the biggest investors in bonds, all them allocating 100 per cent of the their assets to fixed interest.

james.fernyhough@ft.com