UK - Royal Mail has also revealed its pension deficit may have tripled in the last three years.
Elsewhere, Wandsworth Borough Council has appointed two equity managers for its local government pension scheme (LGPS). Oxfordshire County Council has also awarded an actuarial services contract while Powys Council is seeking an active currency manager.Latest figures from Royal Mail's half-year report for 2009/10 revealed it made cash payments of more than £300m (€330m) into the pension fund in the first six months of the year. It also noted that although the pension fund deficit is in the process of its triennial valuation, it is "widely expected" that the deficit of £3.4bn recorded in 2006 will have reached "at least" £10bn.
Data showed the accounting deficit of the scheme had increased from £6.78bn in March 2009 to £7.97bn in September, which it attributed primarily to an actuarial loss following changes to market conditions and increased liabilities.
The firm admitted the Royal Mail Pension Plan "consumed more than £800m in cash" in the last financial year, and warned it remained a "daunting challenge to fund". However, it said it is "exploring with the trustees ways of addressing the legacy deficit".
The pension scheme currently employs two balanced managers - UBS Global Asset Management and Aberdeen Asset Management - who each run around 50% of the scheme's assets.
But Wandsworth council last year approved a new strategy of 70% equities and 30% bonds and initiated a tender process for a number of new investment managers - three active, one passive, one transition manager and a global custodian. (See earlier IPE articles: Wandsworth to change the benchmark and Berkshire halves equity assets under new strategy)
Both contracts are for an initial period of six years, with the option of a further six-year renewal, and both managers will begin on 1 January 2010.
Previously the scheme had employed Hewitt for actuarial services but following the expiry of the current contract Barnett Waddingham will take on a new five-year contract on 11 December 2009. (See earlier IPE article: Oxfordshire seeks actuarial services)
The firm will be expected to provide the pension scheme with a full range of services including triennial valuations, FRS17 calculations, bulk transfers and ad hoc advice.
It is offering a mandate of between £6-9m for a five-year period, and it expects to appoint one or more managers to be responsible for quarterly performance and reporting to the scheme.
Earlier this year, the Welsh council issued a tender for a global equity manager to partially replace Alliance Bernstein. However, the latest pension fund annual report also revealed plans for the scheme to advertise for a fund of funds hedge manager, to run an initial allocation of 2-3% of the overall fund. This would then be increased to 5% over a period of time. (See earlier IPE article: Powys seeks global equity replacement)
The closing date for the active currency tender is 20 January 2010 and further information can be obtained from Hewitt Associates.
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 email@example.com