Pension Scheme Deficits - Latest Monthly Update

 

1st October 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 September 2010, PCS estimates the total DB pension scheme funding position as follows:

 

At 30 September 2010

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE100 Companies

£398bn

£464bn

(£66bn)

86%

FTSE350 Companies

£459bn

£538bn

(£79bn)

85%

All UK Private Sector Pension Schemes

£1,042bn

£1,263bn

(£221bn)

83%

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

At 30 September 2009

Assets

Liabilities

Surplus / (Deficit)

Funding Level

FTSE100 Companies

£380bn

£454bn

(£74bn)

84%

FTSE350 Companies

£439bn

£523bn

(£84bn)

84%

All UK Private Sector Pension Schemes

£958bn

£1,124bn

(£166bn)

85%

 

Charles Cowling, Managing Director of Pension Capital Strategies, comments: "The last year has seen some recovery in markets but little overall change in total pension deficits. We still await clarity on the impact of the Government's announcement that it plans to change all RPI-linked increases to benefits to become CPI-linked *

"Overall, we believe this change could reduce pension liabilities by 5% to 10%. It could therefore reduce the liabilities of UK private sector pension schemes by up to £120 billion. However, it is still unclear whether the Government intends or indeed is even able to produce the necessary overriding legislation which would give maximum effect to the change.

"We believe it is likely that the change will be more limited in scope and cover just statutory increases to pensions and not those RPI-linked increases which are written into pension scheme rules. This could reduce the impact of the change by half, but it would still be a very material reduction in pension scheme deficits."

Note:

* 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 in the RPI, particularly housing costs, which are excluded from the CPI. Again, over time the expectation is that these will mean that RPI increases are greater than CPI increases.

--ENDS--

 

Enquiries:

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.

http://www.pensionstrategies.co.uk/

 



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