UK – KPMG has predicted that an increasing number of so-called “pension zombies” will become insolvent as they struggle with their growing deficits.
A study by the consultancy found that UK corporates’ cumulative exposure to the Pension Protection Fund had increased by 32% year on year to more than £227bn (€282bn).
KPMG said its restructuring experts predicted that persistently high pension deficits were likely to force more companies into administration.
It pointed out that the PPF’s own recently published risk analysis showed that its exposure to insolvencies had increased sixfold over the past year to £1.8bn.
David Costley-Wood, restructuring partner, said: “We have already seen AEA Technology go through a ‘pre-pack’ administration process in the last week, as the ex public sector company could no longer sustain a £450m pension deficit, which dwarfed its revenues.
“We have advised on a steady pipeline of cases in the past year with similar pensions issues and therefore expect to see more ‘pension zombies’ tipped into administration.”
In other news, more than half of corporate pension plans (57%) use liability-driven investing (LDI), according to a recent poll conducted by SEI.
The poll, now in its sixth year, also found that, of those companies using LDI, 52% invest more than 40% of their portfolios in LDI strategies.
In the UK, 76% of respondents said controlling the volatility of the funded status was their chief reason for employing the strategy.
SEI said a significant increase in this figure from 62% in 2011 marked a “heightened awareness” of the need for strategies to contend with erratic market conditions.
Conversely, ‘progressing the plan towards buyout’ decreased as a priority from 75% in 2011 to 48% in 2012.
David Hickey, director for European advice at SEI’s institutional group, said: “The findings of the poll confirm that pension schemes are increasingly focusing their attention on managing the most important aspect of the scheme – funding level.
“There is a clear recognition that market volatility shows no sign of abating, resulting in the need for innovative strategies that provide greater strategic control of schemes.”
Lastly, CBPE Capital has acquired Xafinity Consulting from the Equiniti Group for an undisclosed sum.
CBPE said transaction remained subject to “certain conditions”, including regulatory approvals, and was expected to close during the first quarter of 2013.
Xafinity provides a range of actuarial, pensions, healthcare and other employee benefits consulting and administration services, predominantly to the trustees and sponsors of corporate pension schemes.
It provides services to more than 450 pension schemes, with some 200,000 members, and undertakes pension administration services for more than 115,000 scheme members.