UK Pension Funding Levels Continues to Rise

The funding position of all UK private sector defined benefit (DB) pension plans rose 1% from the end of December, and 4% from the same time last year to 93% as of the end of January, according to JLT Employee Benefits.

For all UK private sector pension plans, assets were down £69 billion to £1.56 trillion from the previous month, but were up £26 billion from the same time last year. At the same time, total liabilities fell £95 billion to £1.68 trillion from the previous month, and were down £34 billion from the same time last year, bringing their funding level to 93%, which is up 1% from the previous month, and 4% from the end of January 2017.

Total assets for the pension plans of FTSE 100 companies fell £10 billion to £678 billion during January, while their total liabilities declined £16 billion to £713 billion, raising their overall funding level 1% to 95%. Meanwhile, their deficit shrunk £6 billion to £35 billion.

Compared to the same time last year, total assets for the FTSE 100 pension plans are up £22 billion from £656 billion, while total liabilities are up £4 billion from £709, which improved their funding level by 2%.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Assets for the pension plans of the FTSE 350 companies fell £12 billion from the end of December to £765 billion, while their liabilities fell £20 billion to £809 billion, which also brought its funding level up 1% to 95%. The change brought their total deficit down £8 billion to £44 billion.

Compared to the end of January 2017, total assets for the FTSE 350 pension plans rose £24 billion from £741 billion, while liabilities increased only £4 billion to £809 billion, which moved their funding level up 3% for the year.

“Markets have seemingly been reasonably benign for pension schemes this month, as overall reported pension deficits continue to drift downwards,” said Charles Cowling, director of JLT, in a release. “However, this masks frantic activity within a few companies with large pension schemes.”

Cowling said that for a lot of companies, the pension deficit used for calculating the cash funding required to be paid by the employer is significantly higher than the pension deficit reported in the employer’s accounts. He added that current actuarial valuations are likely to show a need for significant increases in cash funding.

“There are many companies with large pension schemes which are now going to come under increased pressure to prioritize the financing of pension deficits over returns to shareholders,” said Cowling. “This can only mean that we are likely to see more companies following the Capita example, with share prices suffering as a result.”

Tags: Charles Cowling, JLT Employee Benefits, Pension, UK

Now that Chris Christie no longer operates as New Jersey’s governor, state lawmakers are looking to relaunch a pension management movement his replacement’s administration may be in support of.

The measure, known as Bill S-5, will spin off the $27 billion Police and Fire Retirement System (PFRS) from the state’s $78 billion system to a 12-member board of trustees. The new board will then be responsible with hiring its own executive director, actuary, CIO, and ombudsman.

“The reason that we are where we are today is not because of us and it’s not because of local government,” Eddie Donnelly, president of the New Jersey State Firefighters Mutual Benevolent Association, said, reported by Northjersey.com. “It’s because of the reckless policies and enactments from state government, from the governor and the treasurer’s office.”

The website reports that although municipal and county group representatives opposed it, the managerial swap has received backing from four police and firefighter unions and was unanimously accepted by the Senate state government committee on Thursday.

For more stories like this, sign up for the CIO Alert newsletter. 

Last year, then-Gov. Christie had vetoed a similar bill claiming that a management spinoff would allow labor unions to boost benefits, levied by taxpayers.

“Unfortunately, this bill goes too far and undoes significant portions of the bi-partisan pension reform legislation I signed into law in 2011, unduly jeopardizing the financial health of PFRS,” Christie said in the veto. “I understand that police and firefighters (and, for that matter, all current and future pensioners) have concerns with the fiscal health of the pensions systems… But I refuse to repeat the mistakes of prior Governors and Legislatures who enacted pension legislation without ensuring appropriate safeguards for taxpayers nor securing significant concessions from labor.”

The same sentiments are still felt by the New Jersey State League of Municipalities and the New Jersey Association of Counties, who opposed the bill Thursday, requesting that amendments be made to the proposal for equal balance among union and employer board representation, as well as tightening the abilities the board would have when it comes to benefit increases for participants.

However, the campaign of Christie’s successor, Gov. Phil Murphy, revolved around the support of organized labor. Bill S-5 could see approval if it finds its way to the governor’s desk.

“It’s a ludicrous argument because it’s our pension system,” Patrick Colligan, president of the New Jersey State Policemen’s Benevolent Association, told Northjersey.com. “We’re here because we want to save the system.”

The Senate Budget and Appropriations Committee will review Bill S-5 Monday.

Tags: Bill S-5, New Jersey, Pension, Pension Reform, Police and Fire Retirement System