The Royal Mail Pension Plan (RMPP) saw its assets grow by nearly 70% as falling UK Gilt yields added nearly £2.1bn (€2.8bn) in assets.
The pension fund for staff of the newly privatised UK postal service saw assets increase to £6.5bn from £3.9bn over the year to April.
It received more than £550m in contributions but only paid out £27m after shifting pre-2012 liabilities to the taxpayer to enable privatisation.
The RMPP comprises two pension funds for the Royal Mail Group (RMG) and the Post Office Ltd (POL).
Asset increases were primarily a consequence of a drop in Gilt yields over the year, which pushed up the value of the scheme’s liability-driven investment (LDI) portfolio, managed by BlackRock.
Over the year, the RMPP increased its LDI portfolio, with the pre-hedge of liabilities expected to commence in 2016-17 for the different segments of the scheme.
“During the year,” the RMPP said, “the pre-hedge resulted in a significant rise in value of liability-matching assets, and, consequently, the surplus is expected to have increased – although this is expected to unwind over the period of the pre-hedge as the benefits accrued increase.”
In the year to April, the RMG section achieved an investment return of 6.5% on its return-seeking assets and 89.8% on the LDI portfolio, generating a 2.5% overall investment return.
The POL section achieved a 0.3% return.
The RMG section increased its exposure to alternatives from 3% to 4.3%.
It also increased LDI allocations to 66.4% from 54.1% and reduced equity by 1.4 percentage points to 10.2%.
The majority of its allocation changes came from reducing the cash holdings in the scheme by 6 percentage points – now at 2.4% – as well as property, high yield and investment-grade credit.
The scheme added: “During the year, [RMPP] further diversified its return-seeking assets, adding new private equity portfolios with Quantum Energy Partners and Vivo Capital, as well as a new alternatives portfolio with Och Ziff Capital.”