US Public Defined Benefit Pension Assets Rebound in Q1

The 100 largest public defined benefit pension plans in the US helped offset 2018 investment losses with a $185 billion surge in funding during the first quarter, which was attributed to strong investment gains of 7.34%, according to consulting and actuarial firm Milliman.

The improvement was the largest quarterly funding increase since the firm launched its Public Pension Funding Index (PPFI) in September 2016, while the fourth quarter of last year was the PPFI’s largest ever quarterly decrease at $306 billion.

“The first quarter of 2019 was a welcome relief for public pensions after the dismal investment performance at the end of 2018,” Becky Sielman, author of the Milliman 100 Public Pension Funding Index, said in a release. “Plan sponsors should take this volatility as a reminder to review their asset smoothing policies, to ensure the short-term market fluctuations don’t translate into short-term contribution volatility.”

Estimated investment returns for plans during the quarter ranged from a low of 3.52% to a high of 11.57%, according to Milliman. As a result, the funding ratio of the PPFI rose to 71.0% as of the end of March, from 67.2% at the end of December, but was down from 71.4% at the same time last year.

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The PPFI aggregate deficit stood at $1.508 trillion at the end of the first quarter, compared with $1.693 trillion at the end of December. Meanwhile. the total pension liability continued to increase to an estimated $5.205 trillion at the end of the first quarter, from $5.164 trillion at the end of 2018.

Also during the quarter, six plans moved above the 90% funded level for a total of 14 plans above this mark, up from eight at the end of last year. And at the opposite end, the number of poorly funded pension plans decreased as there were 28 plans whose funded ratios were below 60%, down from 33 at the end of 2018.

The aggregate asset value of the PPFI increased to $3.697 trillion at the end of the first quarter, from $3.471 trillion at the end of 2018. The plans’ investment market value gained approximately $252 billion, which was offset by approximately $26 billion flowing out, as benefits paid out exceeded contributions coming in from employers and plan members.

The results of the PPFI are based on the pension plan financial reporting information disclosed in the plan sponsors’ comprehensive annual financial reports.

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Tags: Miliman, Pension, Public Pension Funding Index, Q1

Philip Green, chairman of the UK’s Arcadia Group, has received the support of pension regulators for his plan to rescue his beleaguered retailer after agreeing to inject an additional £25 million into the retailer’s pension fund, on top of previous commitments of £360 million.

The Pension Protection Fund (PPF) and The Pensions Regulator (TPR) said they now support Arcadia’s company voluntary arrangement (CVA), which includes contributing £385 million to secure its pension plans. The backing comes despite TPR having recently demanded an additional £50 million from Green.

In response to the request for another £50 million, Arcadia Group handed security over additional property assets to the pension plan.

“We recognize that the best support for any pension scheme is a trading employer and we feel the CVA proposals now provide the right balance between security for the pension schemes and the chance of sustainability for the company,” said TPR, according to BBC News.

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Arcadia Group has more than 560 stores in the UK and Ireland, and has roughly 22,000 employees. The company owns retailers Topshop, Topman, Wallis, Evans, Burton, Miss Selfridge, Dorothy Perkins, and Outfit. The defunct BHS chain was also part of the group. The company’s pension plans have an estimated £565 million shortfall.

The CVA, which includes shuttering nearly 50 of its retail stores, still needs the support of the stores’ landlords, who would have to agree to a reduction of rent.

The company’s creditors are expected to vote on the CVA on June 5. If the creditors, and landlords do not back his proposals, the retailer could become insolvent and be put under the management of licensed insolvency practitioners and go into administration.

The firm initially announced 23 stores would close as part of the rescue deal before it was revealed that another 25 stores would be added to that under separate insolvency proceedings.

Under the CVA, the company proposes to cut rent by up to 70% at 194 locations to facilitate a recovery. Green has offered the landlords a 20% stake in the company as an incentive, and has also promised that he will invest an additional £50 million into the stores.

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Tags: Arcadia Group, Pension Protection Fund, Phillip Green, The Pensions Regulator