Nationwide Pension Fund surplus falls by £61m as liabilities rise

The Nationwide Pension Fund’s surplus dropped from £294m to £233m between 4 April and 30 September 2020, according to the building society’s half-year report.

Nationwide attributed this reduction in surplus to a decrease in the discount rate from 1.95 per cent to 1.65 per cent, which contributed to an increase in liabilities from £6,236m to £6,961m.

Employer contributions during the period were lower, with £94m having been contributed in the half-year preceding 4 April and £33m being contributed in the six months ending 30 September.

This £33m contribution was in respect of future benefit accrual, with the period having not seen any deficit reduction contributions.

The building society added that this was partially offset by a rise in the value of equities and illiquid assets held by the scheme, as market volatility reduced.

As such, the fair value of fund assets increased from £6,530m to £7,194m over the period, with Nationwide commenting that this was primarily driven by increases in the value of UK government bonds, listed equities, private equity, infrastructure and property investments.

The Nationwide Pension Fund is the most significant of the building society’s two defined benefit pension schemes and will be closed to future accrual from 31 March 2021.

The scheme’s affected employees will be moved to the defined contribution Nationwide Group Personal Pension Plan (GPP) for future pension savings and will move from active to deferred status, with future indexation of deferred pensions before retirement measured by reference to the Consumer Price Index.

The administrative costs associated with the pension scheme were reduced during the period, falling from £91m in the half year ended 30 September 2019 to £86m in the comparable period in 2020.

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