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Royal Mail has best funded pension scheme of FTSE 100

Thursday, May 1, 2014

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The Royal Mail Group has the best funded company pension scheme within the FTSE 100 index, JLT has said.

Since its entrance into the FTSE 100 index in December 2013, JLT's research revealed that the three best funded schemes are Royal Mail Group with a funding level of 133%, Prudential with 119% followed by Standard Life with 116%.

Out of the 70 companies that disclosed their pension deficits, Royal Mail Group has the fifth largest spend on ongoing defined benefit (DB) provision.

Charles Cowling, JLT Employee Benefits director, said: "Royal Mail Group's recent high profile IPO has catapulted it straight into the FTSE 100.

"However it is the transfer of the majority of the Plan's assets and liabilities to the Government generating an unanticipated balance sheet gain of £3bn that has propelled them to the top of the list of best funded schemes in the FTSE 100."

Despite the arrival of Royal Mail Group into the FTSE 100 index, the combined aggregate deficit of the FTSE 100 schemes has deteriorated by £8bn to £57bn over the 12 months to 31 December 2013.

The total disclosed pension liabilities of the FTSE 100 companies have risen from £475bn to £534bn, JLT said.

Cowling said that the funding for most FTSE 100 schemes remains a "major issue". He said: "Seventy schemes still remain below the water-line. For many of these, the Holy Grail of buy-out remains a long way away."

According to the research, five FTSE 100 companies have total disclosed pension liabilities greater than their equity market value, which could have a significant impact on corporate decision-making in the boardroom, while 14 companies have disclosed pension liabilities of more than £10bn, JLT said.

Cowling said: "With the move from equities towards bonds continuing overall and the recent Budget announcing the possibility of a ban on members transferring out of defined benefit and into a defined contribution pension schemes, we expect those schemes that are in-range to start preparing for buy-out. For those with larger funding gaps the use of buy-ins may help ease some of the pressure to de-risk."

First published 01.05.2014

monique_simpson@wilmington.co.uk