Pension Scheme Deficits - Latest Monthly Update


2nd December 2010, London:  Pension Capital Strategies Limited (PCS) 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 / FRS17) used in company reports and accounts.

As at 30 November 2010, PCS estimates the total DB pension scheme funding position as follows:

At 30 November 2010



Surplus / (Deficit)

Funding Level

FTSE100 Companies





FTSE350 Companies





All UK Private Sector Pension Schemes





For comparison, the corresponding figures as at 30 November 2009 are as follows:

At 30 November 2009



Surplus / (Deficit)

Funding Level

FTSE100 Companies





FTSE350 Companies





All UK Private Sector Pension Schemes






Charles Cowling, Managing Director of Pension Capital Strategies, comments: "Despite equity markets rallying 12 per cent over the past year, we haven't seen quite the same impact on total pension scheme deficits. The picture has become somewhat rosier than 12 months ago, with funding levels improving by 8 per cent in the FTSE 100. However, a recent research note from Goldman Sachs (Strategy Matters, 29 October 2010) highlights the problem of those companies with large pension obligations which have underperformed the market over the last 10 years. The recommendation in this research note is to sell a basket of stocks with pension risk on a sector-neutral basis.

"There is some good news for companies with large pension liabilities. We believe the move from RPI to CPI* could reduce pension liabilities by as much as 10%, meaning the liabilities of UK private sector pension schemes could fall by up to £120 billion. It still remains unclear, however, whether the Government is able to produce the necessary overriding legislation which would give maximum effect to the change. Our view is that the change will likely be more limited in scope and cover only statutory increases to pensions and not those RPI-linked increases which are written into pension scheme rules. This would likely reduce the impact of the change by half, but even this would still be a very material reduction in pension scheme deficits."



* The RPI is the Retail Prices Index; the CPI is the Consumer Prices Index. There are two main differences in these indices. One is in their mathematical construction which means over time that the RPI is greater than the CPI. The other major difference is the inclusion of certain items, particularly housing costs, in the RPI which are excluded from the CPI. Again, over time the expectation is that these will mean that RPI increases are greater than CPI increases.




Charles Cowling                   07920 834047

Paul Dransfield                    020 7528 4933


Notes to Editors:

About Pension Capital Strategies Limited

Pension Capital Strategies Limited (PCS) was established in 2006 to help companies to manage their Defined Benefit pension obligations, offering advice on managing scheme assets and liabilities, on communication with trustees and on finding the right funding solutions.

A subsidiary of the Jardine Lloyd Thompson Group, PCS can draw upon skills and experience in the areas of corporate finance, tax, capital markets, asset management, actuarial and general pension regulation and practice to provide strategic advice and practical answers.


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