The JLT Employee Benefits (JLT EB) monthly index, which shows 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, reveals that pension funding levels have improved since last year.
Charles Cowling, Director of JLT Employee Benefits said:
“Pension scheme deficits have reduced over the course of the year following excellent returns on growth assets and the impact of increases in corporate bond yields. Following this improvement many schemes are reconsidering whether it is the right time to secure liabilities with an insurer. However, just as demand for bulk annuities is likely to start increasing, we are seeing participants in the market considering whether to withdraw – provoked by increased regulatory and capital requirements. Goldman Sachs has decided to sell its majority holding in Rothesay Life and Legal & General completed its acquisition of Lucida at the start of August. A reduction in competition is an unwelcome development for pension schemes and companies that have plans to move towards buy-out. It highlights the importance of monitoring the annuity market to identify opportunities and being ready to seize these when they arise.”
As at 31 August 2013, JLT EB estimates the total DB pension scheme funding position as follows (click on chart to expand it):
For comparison, the corresponding figures as at 31 August 2012 are as follows (click on chart to expand it):