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The total buy-out
solvency deficit of FTSE 100 pension schemes has improved from £200bn
to an estimated £110bn, according to a report by Pension Capital
Strategies Limited (PCS).
The full FTSE 100 report, entitled The FTSE 100 and Their Pension
Disclosures, has been published in association with Numis Securities
and also shows that the combined deficit in these schemes declined
from £12bn 12 months ago to £8bn at 30 June 2008.
PCS said this is partially due to the significantly more competitive
insurance company prices which came with the arrival of new entrants
to the market.
“Lonmin became the first FTSE 100 company to offload its pension
liabilities to an insurance company,” said managing director
at PCS, Charles Cowling. “Friends Provident also completed
a £350million deal with Norwich Union to cover its current
pensioners. The PCS publication – 2008 Survey of Analysts’
Views on Pensions – showed that 72 per cent of analysts in
the survey were neutral to such moves (despite the apparent cost).”
PCS predicts that more buy-outs will materialise in the next 18
months, as indicated in their July 2008 PCS Buyout Market Watch.
“In total, the amount contributed to FTSE 100 company pension
schemes in their last financial year was £12.6bn, down from
£14.3bn in the previous year. This is more than the £7.9bn
cost of benefits provided to employees during the year. It therefore
represents £14.7bn of funding towards reducing pension scheme
benefits,” Cowling continued.
However, PCS has warned that the issue of irrecoverable surpluses
and the impact of new IAS19 guidance could have a huge impact on
the year ahead.
“20 FTSE 100 companies are now reporting an irrecoverable
surplus. The total reported irrecoverable surplus for FTSE 100 companies
is not £2.4bn. New IAS19 guidance (IFRIC14) could dramatically
affect pension surpluses or deficits published in 2008 accounts,”
said Cowling.
- Pensions Age
July 2008
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