Pensions - Articles - Increases in surplus but a golden opportunity missed


The aggregate FTSE100 DB pensions surplus increased from £59bn at the beginning of 2022 to around £67bn at the year-end, corresponding to an increase in average funding level from around 110% to 120%.

 With around 90% of FTSE100 companies disclosing an accounting surplus in their UK DB pension plan and as UK pension schemes reach record high funding levels, LCP’s new Accounting for Pensions report looks at the impact of prudence within UK pension schemes. Whilst the high level of prudence within UK pensions will have largely protected scheme sponsors against possible new significant cash calls, it can have unintended repercussions for corporate balance sheets.

 The huge shift in market conditions over 2022 will also have meant schemes taking a prudent approach will have missed out on a golden opportunity to generate value for sponsors, for members, and for wider stakeholders. Schemes taking more risk will have benefited with significant improvements in funding levels on all measures.

 Other key findings in the report are:
 • Pension schemes have accelerated the move out of equities, with the amount of FTSE100 assets invested in equities falling by £50bn in 2022. This corresponds to the proportion of scheme assets in equities dropping by a third over the year and being less than 10% of total DB pension assets for the first time.
 • Around 3 in 4 FTSE100 CEOs aren’t receiving pension contributions in line with their employees despite ongoing campaigning from the Investment Association for executive pensions to be more in step with the rest of the workforce.
 • Increases in corporate bond yields over 2022 has led to a £200bn reduction in UK DB pension liabilities for the FTSE100.
 • Three times the number of companies disclosed making an allowance for the impact of Covid in 2022 compared to 2021, highlighting that the long-term impact of the pandemic is now more established.

 Gordon Watchorn, Partner and Head of Corporate Consulting at LCP, commented: “Prudent pension strategies largely worked as intended throughout the LDI crisis and limited risks of future cash calls on pension scheme sponsors. Whilst this has increased the security of DB pensions over recent years, we are now at a point whereby schemes are looking to explore and implement different options to make the most of opportunities.

 Jonathan Griffith, LCP Partner and author of the report, added: “With improved funding positions and market innovation, pension schemes are no longer seen as a millstone weighing down corporate growth. DB pensions in the UK now stand at a crossroads – they could be consigned to the history books as the rapid increase in insurance de-risking takes hold, or could be seen as an opportunity for growth and improved outcomes delivering enhanced value for all stakeholders and wider UK plc.”
  

  LCP’s new Accounting for Pensions report

Back to Index


Similar News to this Story

94 percent view State Pension as an entitlement not benefit
Majority of adults aged 66+ say that Triple Lock is affordable and fair to older generations. Around one in seven rely on the State Pension to provide
Fair play off the pitch
Male players in the English Premier League earn an average of more than £3 million per year, while their female counterparts average around £47,000. T
Why Bitcoin matters to Pension Schemes
Back in November 2024, Cartwright Pension Trusts announced its role in facilitating the first-ever UK DB pension trust investment in Bitcoin. With the

Site Search

Exact   Any  

Latest Actuarial Jobs

Actuarial Login

Email
Password
 Jobseeker    Client
Reminder Logon

APA Sponsors

Actuarial Jobs & News Feeds

Jobs RSS News RSS

WikiActuary

Be the first to contribute to our definitive actuarial reference forum. Built by actuaries for actuaries.