Consultancy LCP yesterday released its Accounting for Pensions 2014 report giving an insight into the pension arrangements of some of the country's biggest companies. The report at times paints a bleak picture for defined benefit schemes.
According to the report there are currently no FTSE 100 companies that offer a traditional final salary scheme and only four companies now provide any type of DB provision for new employees.
They are Diageo, Johnson Matthey and Morrisons, which offer a cash balance scheme, and Tesco, which offers a career average scheme.
Four companies closed their DB schemes in 2013 and three have agreed to close their schemes to further accrual in the near future.
In 2013 the total pension contributions by FTSE 100 companies fell to £20.2bn from £21.9bn in 2012.
Source: LCP
According to the report there are currently no FTSE 100 companies that offer a traditional final salary scheme and only four companies now provide any type of DB provision for new employees.
They are Diageo, Johnson Matthey and Morrisons, which offer a cash balance scheme, and Tesco, which offers a career average scheme.
Four companies closed their DB schemes in the year and three companies have agreed to close their schemes to further accrual in the near future.
In 2013 the total pension contributions by FTSE 100 companies fell to £20.2bn from £21.9bn in 2012.
Source: LCP
The report found contributions to DB schemes totaled £14.8bn, with the consultancy estimating £7.6bn went towards filling deficits.
Last month we reported that Imperial Tobacco upped its deficit contributions after a decrease in the funding level. Contributions started at £47.5m in March of this year and will steadily increase to £62.5m until 2028.
Part of this decrease was due to asset-backed contributions, with around one in five of the companies having such a structure in place.
Recently, we reported that engineering and electronics company Siemens has set up a Scottish limited partnership for its £3.2bn UK DB scheme to address its funding deficit.
Investments
Schemes' allocation to equities decreased in 2013, even though equity markets were producing stellar returns. This could be attributed to schemes looking to lock in gains from equity investments to fund derisking programmes.
Source: LCP
In June, we reported that the Caterpillar Pension Plan had cut its active equity to fund a trigger-based derisking strategy.
There has also been a move in recent months for schemes to hedge longevity risk. The biggest deal so far was from the £16bnBT Pension Scheme which hedged 25 per cent of the improvements in longevity.
With the recent Budget announcements, the pensions landscape for corporate schemes will no doubt face further changes, with DB-to-DC transfers seen as one way of reducing the liabilities total.
