Skip to main content
The Actuary: The magazine of the Institute and Faculty of Actuaries - return to the homepage Logo of The Actuary website
  • Search
  • Visit The Actuary Magazine on Facebook
  • Visit The Actuary Magazine on LinkedIn
  • Visit @TheActuaryMag on Twitter
Visit the website of the Institute and Faculty of Actuaries Logo of the Institute and Faculty of Actuaries

Main navigation

  • News
  • Features
    • General Features
    • Interviews
    • Students
    • Opinion
  • Topics
  • Knowledge
    • Business Skills
    • Careers
    • Events
    • Predictions by The Actuary
    • Whitepapers
    • Webinars
    • Podcasts
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive
Quick links:
  • Home
  • The Actuary Issues
  • May 2012
05

Trustees 'will seek over £100bn to plug deficit gap'

Open-access content Tuesday 15th May 2012 — updated 5.13pm, Wednesday 29th April 2020

Pension fund trustees could seek more than £100bn in deficit reduction payments from scheme sponsors over the next three years as they try to address the risk of members receiving less than their promised benefits.

2

According to a survey of 170 pension fund trustees published today by Pension Corporation, 46% expect funding levels to be worse than at the last valuation when this year's round of triennial valuations is carried out.

This is despite trustees having received more than £80bn in deficit reduction payments over the past three years. Employer contributions have mainly been used to compensate for underperformance of assets against liabilities, the consultancy said, leaving schemes some £110bn behind their deficit reduction targets.

Almost four in 10 (37%) of trustees now expect to negotiate an increase in sponsor contributions over the next three years, with 20% of those surveyed seeking an increase in payments of over 10%. Deficit reduction payments over the next three years could amount to 13% of UK corporate cash holdings, Pension Corporation said.

The survey also found that, while 29% of schemes expect to see lower asset returns in the future, more than half of those surveyed (53%) had taken no steps to reduce the major liability risks -longevity, inflation and investment risk exposure.

According to Pension Corporation, a 1% rise in long-term inflation expectations could increase liabilities by around 20%.

David Collinson, co-head of business origination at the consultancy, said the situation meant that a 'significant minority' of members of defined benefit schemes could lose out on some of the benefits they expected to receive, despite the money ploughed into plans by sponsors.

'What many in the pension system fail to realise - or worse are afraid to say - is that those members who hope to start drawing their pension in the next few years or decades will not necessarily be getting what they were promised today,' he said.

 'Excessive costs caused by too much misguided legislation, poor matching of investments and liabilities and the overall economic environment have combined to create a perfect storm which will very likely wash away benefits from a significant minority of members of defined benefit pension funds.'

He added: 'Hard pressed sponsors may well despair that the huge amounts of money they have put into pension plans seems to be eaten up by continued asset and liability underperformance.'

This article appeared in our May 2012 issue of The Actuary.
Click here to view this issue
Filed in:
05
Topics:
Pensions

You might also like...

Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

Senior Underwriting Risk Manager

London (Central)
£85K-£95K + Benefits
Reference
124386

Reserving Manager (Contract)

London (Central)
£1200 - £1400 per day
Reference
124385

Life Actuary - Contract - IFRS 17 Financial Impact

England, London / England, Bristol / North Yorkshire, England
£900 - £1150 per day
Reference
124384
See all jobs »
 
 

Today's top reads

 
 

Sign up to our newsletter

News, jobs and updates

Sign up

Subscribe to The Actuary

Receive the print edition straight to your door

Subscribe
Spread-iPad-slantB-june.png

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
​
FOLLOW US
The Actuary on LinkedIn
@TheActuaryMag on Twitter
Facebook: The Actuary Magazine
CONTACT US
The Actuary
Tel: (+44) 020 7880 6200
​

IFoA

About IFoA
Become an actuary
IFoA Events
About membership

Information

Privacy Policy
Terms & Conditions
Cookie Policy
Think Green

Get in touch

Contact us
Advertise with us
Subscribe to The Actuary Magazine
Contribute

The Actuary Jobs

Actuarial job search
Pensions jobs
General insurance jobs
Solvency II jobs

© 2022 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited. All rights reserved. Reproduction of any part is not allowed without written permission.

Redactive Media Group Ltd, 71-75 Shelton Street, London WC2H 9JQ