Deloitte actuaries estimate that the final salary pension plans of FTSE 100 companies at the end of 2007 have reached an aggregate surplus of 15 billion. This shows an improvement in performance for 2007 of over 55 billion.
Deloitte analysis of pension deficits for the FTSE 100 companies over 2007
The surplus has arisen as a result of:
Investment returns of around 3.5% over the year.
Higher levels of contributions from employers in recent years that have helped to improve funding levels.
The price of company bonds which are used to value company pension liabilities have fallen reducing the assessed value of liabilities.
Key developments which have shaped the pensions landscape during 2007 are:
The important role that pension scheme trustees have continued to play in corporate transactions. Mega-deals such as the successful acquisition of Alliance Boots and the failed take-over of J Sainsbury have shown just how significant pension schemes are when doing deals.
The effect of new pension funding regulation introduced in 2005 has started to impact schemes as companies are having to meet higher funding targets than ever before.
Companies are becoming concerned about pension scheme surpluses. Companies need to avoid ìover fundingî their pension schemes since surplus cash could become stranded in the scheme.
New players seeking to buy out pension schemes have broken new ground in 2007, with several schemes agreeing to move their assets and liabilities to these firms such as Emap, Thorn and Threshers. More buy-outs can be expected if surpluses continue to increase over 2008.
David Robbins, a pensions partner at Deloitte, comments: ìOver 2008 companies will be looking to solve their pensions problems for good. Options that include transferring pension schemes to new specialist pension buy-out companies are beginning to look viable.î
Based on companiesí own expectations for 2008 stock market performance, Deloitte predicts that the FTSE 100 surplus will have risen to 30 billion by the end of 2008.
Pension schemes surge into surplus in 2007
FTSE 100 pension surplus is 15 billion
