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UK roundup: House of Fraser, Mercer, Barnett Waddingham

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UK - House of Fraser has closed its main defined benefit (DB) pension scheme as well as the James Beattie pension plan - which the company inherited following the acquisition of the Beatties store chain in 2005 - to future accruals.

A spokesman for the retailer confirmed that the move made by House of Fraser to close the schemes came following a consultation with members and trustees.

The closure is part of the company’s plan to cut its pension deficit by 2020, which jumped from £31.7m (€39m) to £85m between January 2011 and January 2012.

In other news, Mercer’s Pensions Risk survey data has revealed that the accounting deficit of DB pension schemes increased marginally over the month of May.

According to the consultancy, the estimated aggregate IAS19 deficit for the DB schemes of the FTSE 350 companies stood at £72bn at 31 May, equivalent to a funding ratio of 87%.

This represents a sharp increase against April, when the deficit figure reached £69bn, with a funding ratio of 88%.

Ali Tayyebi, senior partner at Mercer, said: “During the first half of the month, the aggregate deficit had increased by £25bn to around £94bn - putting it on track to be one of the worst months since August 2010, with deficits back to levels last seen two years ago.

“This was the direct impact of the renewed concerns around Greece’s economic future, which in turn promoted the perceived safe-haven status of UK gilts and high-quality corporate bonds.
 
“However, during the second half of the month, the market’s view of long-term RPI inflation also fell sharply, and this has come as an unexpected benefit for pension schemes.”

Lastly, a survey by Barnett Waddingham has shown that the average IAS19 funding level remained at 88% for FTSE 100 companies with financial years that ended on 31 December 2011.

According to Nick Griggs, head of corporate consulting, significant falls in bond yields and depressed equity values initially indicated a fall in funding levels.

However, these have been offset by lower inflation expectations and significant contributions made by companies over the year.

“The position for some schemes may also have been improved by asset-backed contribution arrangements and liability-reduction exercises,” he added.

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