UK - The London Stock Exchange (LSE) has agreed a £200m (€230m) buy-in with the Pension Insurance Cooperation (PIC) that will see the latter organisation assume responsibility for all current pensioners, as well as all retirees until March 2016.
Announcing its preliminary annual results, the exchange said its defined benefit fund’s surplus had increased by more than £30m to £37.6m at the end of March, with funds being used to cover the difference between the £140m predicted liabilities and the £158m cost of insuring all current retirees.
“The contract includes an obligation to insure future retirements over the next five years on consistent pricing terms for a total premium currently estimated to be £45m,” LSE continued, bringing the total cost of the buy-in to £203m.
Meanwhile, the £1.1bn Somerset County Council Pension Fund is tendering for a global custodian, a position currently held by BNY Mellon.
A spokesman for the local government pension scheme confirmed that BNY Mellon’s contract, which began in February 2005, was nearing its end and that re-tendering the position was a matter of procedure.
The new contract will run five years, with the council retaining the option to renew it for a further two. Interested parties have until 11 July to apply.
Finally, pension funds belonging to the FTSE 100 companies have been criticised for failing to take advantage of their improving funding positions in recent months and employing de-risking strategies.
In its monthly ‘PF Risk Report’ on UK defined benefit (DB) pension risk, PensionsFirst noted that while scheme assets had risen by £29bn since August 2010 and liabilities had fallen by £25bn over the same period, schemes had failed to “lock in” any of these improvements.
PensionsFirst analytics chief executive Benjamin Reid said: “To put this figure in perspective, the improvement in the deficit outweighs the total dividends paid out by the FTSE 100 over the same period.
“Many pension schemes were in a similarly favourable funding position back in 2008, but failed to take the opportunity to reduce risk and subsequently slipped back into deficit when the financial crisis hit. It is worrying to think that many are leaving themselves open to this happening again.”
Andrew Morris, assistant vice-president of client solutions, criticised that de-risking was likely to take a back seat over the next 12 months, as trustees take on the task triennial valuations.
“Given that deficit swings over that period could have economic implications for schemes for the following three years, it is imperative they do not take their eye off the ball,” he said.