mast image

Special Report

Impact investing

Sections

UK roundup: 300 Club, FTSE 350 contributions, accounting standards, PPF

Related images

  • A cold day in London

Related Categories

Sally Bridgeland, former chief executive of BP Pension Trustees, has become the 14th member of the 300 Club of top investment professionals from different countries – the first woman to do so.

The 300 Club, set up nearly three years ago, aims to raise awareness about the potential impact of current market thinking and behaviours.

Bridgeland said: “The demands of maturing pensions funds will change considerably over the next decade, and individual savers need an investment environment they can trust for the longer term.” 

The 300 Club was right to challenge current thinking, she said. 

<

“I hope to contribute to the debate they have started,” she added. 

Bridgeland was chief executive of BP Pension Trustees for seven years until she left the £19bn (€23.8bn) UK corporate pension fund at the beginning of April.

She recently took on the role of senior adviser to governance consultancy Avida International

Bridgeland is the founder of the charity Executive Shift and a fellow of the Institute of Actuaries, as well as a member of the FTSE Policy Group

Before joining BP Pension Trustees, she worked at consultancy Aon Hewitt for 20 years.

The 300 Club is chaired by Lars Dijkstra, CIO at Kempen Capital Management.

The club’s name refers to the legendary 300 Spartans who held off the far larger Persian army at the Battle of Thermopylae in 480 BC, and is meant to symbolise a small group achieving something against the odds.

Meanwhile, new research shows that, even though pension deficit contributions made by the firms in the FTSE 350 are at their lowest for five years, they still amount to nearly 40% of their Total pensions bill.

The research done by consultancy Barnett Waddingham showed that the total IAS19 deficit reported by FTSE 350 companies in 2013 was £55.6bn, down £7.6bn from the aggregate shortfall from the year before.

Deficit contributions paid last year were £8.5bn, down more than 20% from 2012.

Nick Griggs, head of corporate consulting at Barnett Waddingham, said: “The fact 37p of every pound spent by companies on pensions is paid towards clearing pension deficits is striking and illustrates just how much companies are still having to pay to reduce funding shortfalls.”

However, Griggs said the overall picture for defined benefit funding in 2013 had improved somewhat, with deficit contributions apparently putting less of a strain on company finances.

“With TPR’s (the Pensions Regulator) new funding code of practice promising to be less restrictive on corporates going forward, directors should be optimistic about the future,” he said.

The study showed the effects of auto-enrolment coming through for the 350 largest listed UK companies, with defined contribution costs increasing by an average of 16% compared with 2012.

In other news, Aon Hewitt said changes that have been proposed to pensions accounting standards could take more than £25bn from the balance sheets of companies in the FTSE 350, and £1bn from their annual profits.

As things stand, about 25% of the top 350 listed UK companies have an accounting surplus relating to their pension scheme, which is recognised on their balance sheet.

Proposed changes to the IFRIC14 guidance, which supports international accounting standard IAS19, mean surpluses will no longer be recognised unless there is a realistic expectation the company will eventually be able to access it.

Simon Robinson, principal consultant at Aon Hewitt, said: “We expect most companies with schemes that already have a surplus will not be able to recognise it under the new proposal – which would reduce the balance sheets of the FTSE 350 by £8bn.”

But the proposal also affects companies making ongoing deficit contributions that are expected to have an accounting surplus in future, he said. 

“These contributions,” he added, “would now need to be recognised as liabilities on corporate balance sheets, which would amount to a further £20bn hit for FTSE 350 companies.”

Finally, funding among UK defined benefit (DB) schemes has fallen by 1 percentage point over the last month, according to the Pension Protection Fund’s (PPF) 7800 Index.

According to the index, funding fell to 90.5% at the end of July, with the aggregate deficit increasing by £23.7bn to £122.7bn over the same period.

“The position has worsened from the previous year, when a deficit of £88.3bn was recorded at the end of July 2013,” the PPF added.

The funding decline was despite assets increasing by 0.5% in value month-on-month and an overall increase of 4.2% in asset value since July last year.

However, this contrasted with a 6.7% increase in liabilities, from £1.21trn to £1.29trn at the end of last month.

Have your say

You must sign in to make a comment

IPE QUEST

Your first step in manager selection...

IPE Quest is a manager search facility that connects institutional investors and asset managers.

  • QN-2548

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 300-400m.
    Closing date: 2019-07-30.

  • QN-2549

    Asset class: Fixed Income, Emerging Market Debt Hard Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 300-700m.
    Closing date: 2019-07-30.

  • QN-2550

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Active).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2551

    Asset class: Fixed Income, Emerging Market Debt Local Currency (Passive or Passive Enhanced).
    Asset region: Emerging Markets.
    Size: CHF 250-350m.
    Closing date: 2019-07-31.

  • QN-2552

    Asset class: Fixed Income, High Yield (Active).
    Asset region: High Yield (US).
    Size: CHF 500-600m.
    Closing date: 2019-07-29.

  • QN-2553

    Asset class: Fixed Income, High Yield (Passive or Passive Enhanced).
    Asset region: High Yield (US).
    Size: CHF 500-1'100m.
    Closing date: 2019-07-29.

  • QN-2554

    Asset class: Global Real Estate (Equity, unlisted Funds).
    Asset region: World (ex-Switzerland).
    Size: CHF 200 mn (potential for further growth).
    Closing date: 2019-08-07.

  • QN-2555

    Asset class: Real Estate.
    Asset region: European.
    Size: EUR 50 - 100 million.
    Closing date: 2019-07-22.

  • QN-2556

    Asset class: FX Hedging.
    Asset region: Global.
    Size: Mandate size of CHF 1.5 bn.
    Closing date: 2019-08-09.

  • QN-2557

    Asset class: All/large Cap Equities.
    Asset region: China A-shares.
    Size: Unit linked platform (0m USD in initial investment).
    Closing date: 2019-08-01.

Begin Your Search Here
<