DB pension assets fall in value

DB pension assets fall in value

The value of FTSE 100 company pension schemes dropped 4 per cent to £647bn in the month to 30 November, latest figures from JLT Employee Benefits have shown.

The data showed FTSE 100 companies had a deficit of £1bn in the month.

A similar downturn in assets was recorded for FTSE 350 companies, which stood at £731bn, down from £764bn at 30 November, while assets in All UK Private Sector Pension Schemes were valued at £1,524bn, down from £1,579bn.

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Funding levels for FTSE 100 companies schemes remained at 100 per cent, and at 99 per cent for FTSE 350 companies. This compared with a 97 per cent funding level for the All UK Private Sector Pension Schemes.

Charles Cowling, chief actuary at JLT Employee Benefits, said: "The Lloyds Banking Group case on GMP equalisation continues to keep the pensions industry awake at night. The industry is slowly coming to terms with the scale of the task ahead and the efforts necessary to resolve the sex discrimination caused by GMPs. 

"Pension schemes are going to have to recalculate benefits for millions of members, demanding fiendishly complicated calculations that will incur huge additional costs and resources.

"Of course, this blow has come at a time when UK pension schemes and indeed, the wider economy, are facing a looming front of uncertainty as the Brexit deadline draws ever nearer."

He added: "The potential good news in all this, is that we may have an opportunity to simplify pension scheme benefits, using conversion legislation recently introduced. We will very soon be in a position to calculate the increase in total value required to each pension scheme member’s benefit."

Final salary scheme members who contracted out are set to receive millions of pounds in back payments after a landmark ruling in a case brought by the trustees of Lloyds Bank's DB schemes this summer.

In a decision which could have widespread implications for hundreds of thousands of pensioners, Justice Morgan ruled trustees must equalise benefits between women and men who have guaranteed minimum pensions (GMPs) because of contracted out benefits.

Pensions advisory firm LCP warned in October that FTSE 100 firms might have to recognise an additional liability on their balance sheets as soon as 2018 due the case.

It predicted a profit hit of up to £15bn, alongside an increase in pension deficit and contributions.

Scott Gallacher, director at Rowley Turton, said: "I can’t see how the High Court ruling could have made an impact on the figures for such a recent period.

"Perhaps they will in a few months’ time, but right now I’d say it is just normal adjustments that happen when assets are moved around. Interest rate changes will also feed into the results."