Relief for final salary members as pension deficits halve

[Yamr1]

Relief for final salary members as pension deficits halve in a month

a "perfect cocktail" of rising interest rates and stock markets has wiped £50bn from the deficits of Britain's "final salary" pension funds over the past month alone.

Corporate schemes must meet the pension promises made to retired staff – but in recent years the value of liabilities has far outweighed schemes' assets. As a result most have been in deficit since the financial crisis.

But the latest figures from the Pension Protection Fund, the statutory "lifeboat" fund, show that the combined deficit of Britain's nearly 6,000 schemes fell from £104bn to £51bn at the end of January.

Shortfalls are at their lowest level since the start of 2014. The schemes' aggregate funding ratio, a measure of how assets cover liabilities, increased from 94pc to 97pc.

[Yamr1]

Should this new pension deal were offered be pulled ?????

[GRS]

Of course it won’t. The bosses at the top are hand in glove with the pension plan trustees and all it means is more money for them to cream off and stick in their own pockets. Absolute joke that you can have RM directors sitting on the board of the trustees.

[fishtank]

What it does show is how transient and ethereal a pension "deficit" really is. It's an accounting trick, a worst case scenario that can't really happen in practice unless a company goes bust which ironically is what can happen when a company is forced to fill the hole that isn't really a hole.

[Navalron]

We all know that RM said that there was going to be a billion pounds deficit. Has anybody actually sat down and had independent people look at the figures. I think its bullshit. All these years in profit and plenty to cover future pensions, then suddenly just a couple of years after being sold for (pennies) and all the changes they say its going to burst the company. Oh bullshit. Did the union even ask to look at the figures.

[BeamishStout]

Relief for final salary members as pension deficits halve in a month

a "perfect cocktail" of rising interest rates and stock markets has wiped £50bn from the deficits of Britain's "final salary" pension funds over the past month alone.

Can you give a source for this statement?

Last month on 13/01/18 the FTSE was standing @ 7778.64, The DOW was standing @ 25803.19
Today the FTSE is 7213.97 and the DOW currently @ 24600 ish.

All markets have fallen in the last month. The value of my personal AVC's has fallen after a meteoric rise in 2017. Cannot see how pension deficits have fallen by this amount!

Perhaps a link to where your got your information from might be helpful.

But now I see where you got this from - the fountain of all knowledge 'The Daily Telegraph'

There is more to the article than you quoted in your original post so perhaps you could amend amend your post to include as much of the article as possible. including the bit about

However, he warned that in isolation the figure did not paint an accurate picture of the health of schemes.

and

The PPF values liabilities on the basis of how much it would cost to insure the pensions on the open market. The yield on government bonds is the main factor, with even tiny movements adding or deducting billions of pounds from liabilities.

[TrueBlueTerrier]

The full article for info http://www.telegraph.co.uk/pensions-ret ... lve-month/" onclick="window.open(this.href);return false;

A "perfect cocktail" of rising interest rates and stock markets has wiped £50bn from the deficits of Britain's "final salary" pension funds over the past month alone.

Corporate schemes must meet the pension promises made to retired staff – but in recent years the value of liabilities has far outweighed schemes' assets. As a result most have been in deficit since the financial crisis.

But the latest figures from the Pension Protection Fund, the statutory "lifeboat" fund, show that the combined deficit of Britain's nearly 6,000 schemes fell from £104bn to £51bn at the end of January.

Shortfalls are at their lowest level since the start of 2014. The schemes' aggregate funding ratio, a measure of how assets cover liabilities, increased from 94pc to 97pc.

The recent high-profile collapse of firms with large final salary schemes such as BHS and Carillion has thrust the security of legacy pension funds into the spotlight and left members fearing for their retirement income.

Although pensions paid by failed companies are guaranteed by the PPF, there has been a steep rise in the numbers of people transferring out of schemes.

The PPF values liabilities on the basis of how much it would cost to insure the pensions on the open market. The yield on government bonds is the main factor, with even tiny movements adding or deducting billions of pounds from liabilities.

What is the Pension Protection Fund?
Before the PPF was established in 2005, savers could find themselves left with nothing if the employer behind their final salary scheme went bust.

The PPF also runs the Financial Assistance Scheme, which helps some members of schemes that began to wind up between January 1997 and April 2005. The PPF works like an insurance plan, with schemes paying a levy to cover members in the event that the scheme can no longer pay out.

If your scheme falls into the PPF and you are already retired, your pension will be paid at exactly the same level. If you are yet to retire, payments are capped at 90pc of the promised rate.

However, high earners – not yet retired – face a substantially bigger loss. There is an overall cap on compensation, currently £38,505 for a 65-year-old, or £34,655 where the 90pc cap applies. Savers with long service get special protection: the cap is increased by 3pc for each full year of service above 20 years, up to a maximum of double the usual cap.


According to the PPF, the dramatic fall in deficits was caused by a small increase in the yield on 15-year gilts, which offset a small decrease in the overall value of assets.

Markets falls in recent weeks are likely to have reversed some of those gains already, but it is too early to see the effect of this in the PPF's analysis.

Calum Cooper of Hymans Robertson, a pensions consultancy, said the fall was caused by a "perfect cocktail of steady stock market returns as a result of enthusiasm around President Trump's tax reforms, as well as modest increases in gilt yields".

However, he warned that in isolation the figure did not paint an accurate picture of the health of schemes.


"When the industry starts measuring what matters – the chances of members receiving the pensions they expect in good times and bad – instead of just deficits, we’ll develop investment, covenant [the strength of the guarantees offered by the companies behind the schemes] and funding strategies that will sustainably improve these outcomes for our pensioners," he said.

Companies supporting schemes with deficits are required to produce a "recovery plan", approved by the pensions regulator, usually every three years. This makes the timing of the valuation incredibly important.

These recovery plans normally lead to millions of pounds of extra funding, which firms have argued prevents them from reinvesting in their business.

[fly-catchers]

I assume that if you took your pension early like NRA65 at 60 if the company went bankrupt the PPF would treat that part as being covered by 90% rather than 100% because you hadn't got to 65?

[BeamishStout]

I assume that if you took your pension early like NRA65 at 60 if the company went bankrupt the PPF would treat that part as being covered by 90% rather than 100% because you hadn't got to 65?

Don't even want to think about the scenario of RM going bust I have enough issues worrying about things out of my control as it is

BTW thank you to TBT for cut and pasting the whole article.

I'm really not sure how much faith to put in this story in the long-term as a revaluation carried out say at the end of February would no doubt cast a different picture on pensions funding. The corollary of the headline story would be that the perfect storm causing pension deficits to soar back up to £105 billion would be a modest fall in the yield on 15-year gilts and falling stock markets. The second part has happened and I have no powers of clairvoyancy re the yield on gilts and bonds. Got more chance of backing the Grand National winner.

[stephen500]

What it does show is how transient and ethereal a pension "deficit" really is. It's an accounting trick, a worst case scenario that can't really happen in practice unless a company goes bust which ironically is what can happen when a company is forced to fill the hole that isn't really a hole.

All caused by Robert Maxwell and the changes made to secure pensions because of this fraud.
Royal Mail pension was never spoken about before this scandal and was paid for years with no problem