ENP Newswire -
Release date- 18082014 -
Various measures of the funding status of schemes indicate that many are now over 100% funded. A recent survey of 86
'Pension schemes are clearly not out of the woods but as they seek stability they are doing so from a position which is different to where they were just a few years ago. Funding levels have improved substantially and you can make a case that many schemes now have enough money without further deficit contributions being made. From both cash and accounting perspectives, many sponsoring companies are therefore likely to be pushing back on any demands for further deficit contributions into a scheme.
'Companies and trustees will therefore increasingly view their schemes through different lenses, as the companies see the risk of trapped surplus, while the trustees still see funding deficits because they are required to consider a prudent funding basis. Companies will want to consider reducing deficit contributions, but trustees with schemes which are still underfunded on a prudent funding basis are likely to seek other means of security for members' benefits if they are to accept the end of deficit contributions.'
'As they become less keen on paying in cash we are already starting to see more companies considering alternative ways of providing that security, including escrow, charges over assets, letters of credit, surety bonds and other mechanisms. The latest
'As ever with pensions, there is no one-size-fits-all but we believe that alternative financing solutions are an option that every DB pension scheme should be considering as part of their strategy to reach pensions stability.'
Aon Hewitt Capital MSL
01372 733689 020 3219 8811
Notes to editors
About the survey
Survey was based on 86 'Tranche 8' valuations recently completed by
'Best estimate' represents the cost of providing benefits with all margins for prudence stripped out. In effect, there is a 50/50 chance that the money required will be greater or less than this amount.
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OCTOBER 30, 2014
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