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UK roundup: FTSE100 companies' DB liabilities up £100bn in 2016

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The overall deficit of the largest UK-listed companies’ defined benefit (DB) pension schemes grew by more than £10bn (€11bn) last year despite significant contributions from sponsors, according to a new survey.

The deficit rose to nearly £25bn as at the end of 2016, according to Barnett Waddingham’s annual survey of FTSE100 pension accounting disclosures.

A decrease in the average discount rate by 1.1% from 2015 along with higher inflation assumptions combined to increase the value of liabilities by £100bn, it said.

Martin Hooper, associate at Barnet Waddingham, said: “On the face of it, the deficits disclosed by the FTSE100 remained remarkably stable, given the scale of movements in discount rates and inflation expectations.

“However, with the level of contributions made towards the pension deficits over the year, companies would have been hoping for an improvement.”

The average IAS19 funding level for the companies in the survey was 91% in 2016, down from 94% in 2015. Barnett Waddingham said this equated to an increase in the deficit of around £10bn.

The actuarial firm also highlighted a decrease in schemes’ allocation to traditional growth assets since 2015 – down from 31% to 29%. In 2009 the allocation, which includes equity and property, stood at 46%. Bonds and fixed income assets increased from 41% in 2009 to around 54% in 2016.

The survey also found a slight reduction in life expectancy assumptions, with Barnet Waddingham saying the value of liabilities in the companies in its survey could fall by around £15bn if all companies updated their mortality projects.

The aggregate deficit among all the UK’s private sector DB schemes is estimated to have shrunk from £245.6bn to £232.3bn during May, according to the Pension Protection Fund. 

T-Mobile trustees appoint fiduciary manager 

The trustees of T-Mobile International UK Pension Scheme have appointed BlackRock as fiduciary manager.

The mandate is for total plan management of the £100m DB scheme, with an overall aim of closing the scheme’s deficit over time.

BlackRock has been mandated to design a customised investment strategy, provide strategic investment decisions, and implement these across a range of managers.

The investments are divided into three main areas: liability-driven investment to reduce liability risk, “liquid growth” (which includes equities and fixed income), and alternatives.

BlackRock was appointed following an open tender market testing process run by Barnett Waddingham.

The chair of the pension scheme trustee board, Steve Carrodus of Pitmans Trustees, said: “We wanted to set a long-term strategy for the scheme and to implement this without increasing the governance burden for the trustee board. Fiduciary management seemed the right solution for us and BlackRock outlined a compelling proposal to achieve our objectives.”

Scottish public fund finalises investment performance measurement mandate

Lothian Pension Fund, the £5.4bn local government pension scheme for the city of Edinburgh, has appointed Leeds-based Portfolio Evaluation for an investment performance measurement and risk analysis mandate.

The contract is also open for use by the pension fund for neighbouring Falkirk council.

The Falkirk and Lothian pension funds already collaborate on investment, in infrastructure, and have been debating deepening their collaboration. Scotland’s public pension funds overall have been looking into options for increased pooling, such as of shared services or investment assets. 

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