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
  • Jobs
  • IFoA
    • CEO Comment
    • IFoA News
    • People & Social News
    • President Comment
  • Archive

Topics

  • Data Science
  • Investment
  • Risk & ERM
  • Pensions
  • Environment
  • Soft skills
  • General Insurance
  • Regulation Standards
  • Health care
  • Technology
  • Reinsurance
  • Global
  • Life insurance
Quick links:
  • Home
  • The Actuary Issues
  • June 2017
06

Ability to meet DB pension obligations at lowest point since recession

Open-access content 20th June 2017

FTSE350 firms are finding it harder to fulfil their defined benefit (DB) pension obligations now than at any point since 2009, according to research by PwC.

2

The UK's biggest companies were given a score of 69 out of 100 for their relationship between financial strength and the size of their DB pension scheme commitments.

This is down from 82 in 2015, with a fall in long-term guilt yields resulting in increased company deficits, and The Pensions Regulator estimating that 5% of schemes are now at risk, or already failing to, meet obligations.

"This score is the largest drop since the recession," PwC pension credit advisory practice head, Jonathon Land, said.

"The last time we saw a fall this big was because of company performance, this time it's because of scheme size.

"If a combination of political uncertainty following the election and Brexit leads to another economic jolt to company performance, this would be a double-whammy for pension scheme support."

PwC's Pensions Support Index shows FTSE350 companies' ability to meet DB pension obligations since 2006:

PwC’s Pensions Support Index

The PwC analysis shows schemes that struggle to meet their commitments, and have significant outgoings to cover member benefits, risk becoming cash flow negative and forced to sell assets to pay liabilities.

"For many, with either a weak covenant or a relatively mature scheme, time is running out," Land continued.

"These schemes need to focus on the strength of their employer, the ability to make increased contributions, and the risks attached to their investment strategy."

This comes after research by Mercer earlier this month showed that 55% of UK DB schemes are cash flow negative, up from 42% last year, with 85% of those remaining also set to be cash flow negative by 2027.

"Being cash flow negative is a natural life stage of a mature DB pension scheme, of course, but recent stock market performance may have lulled some into a false sense of security," Mercer global director of strategic research, Phil Edwards, said.

"Trustees of cash flow negative schemes need to be sure that, in the event of a large market correction, liquid assets are available to meet cash flow and collateral needs, without requiring the scheme to crystallise losses."


Sign up to our free newsletter here and receive a weekly roundup of news concerning the actuarial profession
This article appeared in our June 2017 issue of The Actuary.
Click here to view this issue
Filed in:
06
Share
  • Twitter
  • Facebook
  • Linked in
  • Mail
  • Print

Latest Jobs

IFRS 17 consultant

Hong Kong
Negotiable
Reference
118883

Wealth Investment Associate Manager

Edinburgh, Scotland / West Midlands, England, Birmingham / England, London
£40000 - £55000 per annum + bonus + benefits
Reference
118882

Lloyd's Managing Agency - Actuarial Analyst

London (Central)
Up to £65000 per annum + benefits
Reference
118881
See all jobs »
 
 

Most-Popular

 
 
 

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
​
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

© 2020 The Actuary. The Actuary is published on behalf of the Institute and Faculty of Actuaries by Redactive Publishing Limited, Level 5, 78 Chamber Street, London, E1 8BL. Tel: 020 7880 6200