The Weekly Wrap: February 13 edition

Trustees eye record-breaking private scheme deficits

FT: The Pension Protection Fund said low gilt yields have pushed liabilities to new highs, with aggregate deficit of PPF-eligible schemes rising by £100bn in a single month to £367.5bn at the end of January. In the past year, deficits have increased around eightfold from £46bn. The PPF said the figure was a snapshot and advised members to look at the numbers in a long-term context. 

Eurozone QE program could push deficits higher

FT: As the European Central Bank prepares to start quantitative easing, companies are contemplating ballooning deficits spurred by ultra-low yields. By the end of 2014, the funding ratio for German blue-chip company funds had already fallen to just 56 per cent. The shortfalls will force many companies to pour funds into their schemes to stem the deficit, following the examples of BT and Lufthansa. 

Schemes weigh high salaries for top execs

FTfm: Amid budget restraints and limited benefits, schemes are attempting to balance attracting top in-house talent with demands for private sector wages. But some consultants counter that even highly paid, in-house executives are cheaper than cumulative fees for external managers. The debate has sharpened as schemes including the London Pensions Fund Authority and Railpen have moved to develop in-house investment teams.

Pensioner bond scheme to be expanded by £5bn

FT: The government is to extend until the general election a programme of issuing bonds with a much higher rate of interest for people over the age of 65. Chancellor George Osborne said it would cost millions to extend the three-year, 4 per cent bond, after its initial £10bn issue was oversubscribed. The move follows several other pledges to protect pension benefits, which critics have called an election ploy.

State pension forecasts for people within 10 years of retirement

FT: State pension information will now be given to people aged 55 and over, lowering by five years the age for receiving personalised forecasts for a state pension. The estimate will provide details on how much a retiree can expect to receive under the single-tier pension, which will begin in 2016.

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This week's social media comment

Dermot Dorgan responded to Pensions Expert editor Ian Smith's comment on low yields depressing scheme funding.

@iankmsmith @PaulineSkypala Not us. We've always recommended: hedge = funding ratio. This immunizes the funding ratio from inflation & rates

— Dermot Dorgan (@dermotdorgan) February 9, 2015