Nationwide’s DB pension fund deficit falls by £262m

The Nationwide Pension Fund’s deficit fell by £262m over the past six months to £83m, according to Nationwide Building Society’s interim results for 2018.

The DB scheme’s deficit reduction between 4 April 2018 and 30 September 2018 is attributed to “improving market conditions combined with an employer deficit contribution of £61m agreed as part of the 2016 triennial valuation”.

Furthermore, the scheme’s trustees and Nationwide have “taken actions which are expected to have a positive impact on the volatility of the funds deficit”.

Specifically, it has “progressed its liability hedging strategy” and invested £310 in index-linked and conventional gilts, “to further reduce its exposure to inflation and interest risk rate”.

Nationwide’s report also detailed that its DB pension obligations have increased by £84m to £155m in comparison to 30 September 2017.

Total employer DB contributions over this period reached £96m, including the £61m agreed in 2016, a decrease of £20m in comparison to this time last year.

Its pension administration costs for the first half of the financial year remained at £86m.

The recent High Court ruling on GMP equalisation is forecast to have an impact on the Nationwide Pension Fund.

The report explained: “The verdict will result in an increase in the Nationwide Pension Fund's retirement benefit obligation; the exact impact is currently being assessed but is not expected to be material.

“Nationwide will continue to monitor developments in relation to GMP; the increased financial obligation is expected to be recognised as a charge in Q3 2018/19.”

Nationwide currently operates two defined contribution schemes and a “number of” defined benefit schemes, the most significant being the Nationwide Pension Fund.

Nationwide Building Society chief financial officer, Mark Rennison commented: "These results show that Nationwide is built to last and continues to provide a secure home for members' money.

“Trading was strong in the first six months and we have strengthened our CET 1 capital ratio to 31.7 per cent, and UK leverage ratio to 5.0 per cent.

This performance gives us the confidence to increase our investment in our future, which will allow us to pursue new opportunities for the benefit of our members.”

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