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Pension scheme liabilities stable, says Xafinity

Xafinity has warned against complacency among pension schemes after publishing figures which reveal that defined benefit scheme liabilities remained unchanged last month.


09 MAY 2012 | THE ACTUARY NEWSDESK: NICK MANN
Hugh Creasy Xafinity
Hugh Creasy, director at Xafinity Corporate Solutions

The consultancy’s latest monthly update on the funding position of the UK’s DB schemes, published yesterday, puts scheme liabilities last month at £1,568bn and scheme assets at £1,061bn. These figures, the same as for March 2012, mean that – based on FRS17 and IAS19 accounting rules – schemes’ deficit was £507bn.

Xafinity said that, while the figures indicated short term stability in schemes’ liabilities, most sponsors were right to be concerned that deficits had seemingly plateau-ed at around half a trillion pounds.

Failing to recognise the magnitude of these deficits could leave sponsors open to ‘very painful’ cash calls in the future, it said. Companies may have to take small ‘progressive’ steps now to resolve these long-term financial issues without assistance from the broader financial markets.

Hugh Creasy, director at Xafinity Corporate Solutions, said: ‘Low gilt yields are causing sponsors and trustees to watch markets with eagle eyes, trying to spot any shifts which betray how much of the surge in funding deficits is just a temporary distortion, and how much is a longer term shift.

‘If this trend continues, sponsors will need to take a much more active role in managing their deficits down as the markets may not come to the rescue.’

Xafinity’s assessment of the month-to-month changes in schemes’ funding positions mirrors that also given by Mercer yesterday.

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