Rentokil runs counter to Menzies and Persimmon deficits
UK - The £232m (€293m) John Menzies defined benefit (DB) scheme has moved from having a fully-funded surplus to being in deficit in the first half of 2008, and housebuilder Persimmon has extended its gap, but the Rentokil pension fund has bucked the trend by using its escrow account.
Interim results for the Menzies logistics firm showed the Menzies pension fund shifted from a £6.8m surplus to a £6.5m and its total value fell from £250.2m to £231.8m in the last six months, as the actual return on scheme assets was a loss of £16.1m.
This is in comparison to an expected return of £7.9m, and a gain of £14.8m in the first half of 2007, while the liabilities of the pension scheme increased by a further £100,000 to reach £240.8m.
The latest figures reveal the pension fund had a disappointing first half of 2008, even though John Menzies contributed the final £4.8m of a £10m special contribution programme which helped the pension scheme become fully-funded and move into surplus.
The improvement in the funding levels followed the company's decision to move the scheme from a final salary scheme to an average salary scheme, with increased employee contributions, but which reduced pension liabilities by £5.8m.
Elsewhere, building firm Persimmon reported a fall in pre-tax profits of 64%, following the impact of the credit crunch and the slowing of the housing market, and also revealed its pension deficit has increased.
Interim results showed the deficit in the main £247m Persimmon Pension & Life Assurance DB Scheme, which closed in September 2001, rose from £60.7m at the end of December 2007 to £61.4, at the end of June, although this is still over £3m lower than the deficit at the same period in the previous year.
The marginal increase follows a fall in pension liabilities of £31.5m to £308.5m in the last six months, however this drop was offset by a slightly higher £32.2m reduction in the value of the scheme's assets, as they moved from £279.3m to £247.1m.
The change in funding levels could be attributed to the scheme's current asset allocation, which at the end of 2007 was 64% in equities, 26% in bonds, 2% in property and the remainder of the fund in cash.
In contrast, pest control firm Rentokil reported an IAS19 accounting surplus of £84.8m in its UK Rentokil Initial Pension Scheme (RIPS) at the end of June, following the release of £50m in additional deficit contributions through an escrow account.
Figures from the company's interim report showed the triennial actuarial valuation conducted on 31 July 2007 revealed a deficit of £80.4m, however £50m was released into the scheme in January 2008, and a further £33.8m was placed in the escrow account in July 2008 to address the remaining deficit.
The report showed on an IAS19 accounting level the UK scheme had a surplus of £84.8m, but Rentokil confirmed the scheme actuary will make an "informal valuation" of the fund on September 30.
If a deficit is revealed, the necessary amount - up to the maximum £33.8m - will be released from escrow in January 2009, although any funds left in the account will remain there until the next formal valuation, when they will either be released to the pension scheme or returned to the company.
The latest figures showed the total value of the UK RIPS scheme and other DB schemes in Ireland, Germany, Australia, Belgium, Norway and France, is £994.4m - an increase of £11.4m from the same period in 2007, with the overall funding position moving from a deficit of £85.6m to a surplus of £70.8m.
Rentokil was one of the first of a run of UK companies to announce the closure of its UK DB scheme in 2005, in an attempt to address a £349m deficit resulting from increasing longevity.
This led to the scheme revealing a 'reversed' asset mix of 80% fixed income and 20% equities in 2006, a move that was cemented with the appointment of Standard Life Investments to run a £340m bond portfolio in October 2007. (See earlier IPE articles: Rentokil details asset revamp and UK pest controller taps Standard Life)
If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email firstname.lastname@example.org