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.

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 “over funding” 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: “Over 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.”

Based on companies’ 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.

For further information on supporting graphs download our press release Pension schemes surge into surplus in 2007. (PDF, 231 KB) 

Ends

Notes to Editors
The above analysis is based on Deloitte calculations of the FTSE 100 companies using disclosed FRS 17 and IAS 19 information on their UK and overseas pension and post retirement benefit arrangements.

About Deloitte Total Reward and Benefits Limited
Deloitte Total Reward and Benefits Limited is a multi-disciplinary consulting group comprising 100 actuaries and other pensions and benefits specialists, which focuses on delivering high quality pensions advice to employers and scheme trustees. Deloitte Total Reward and Benefits Limited is authorised and regulated by the Financial Services Authority.

About Deloitte
In this press release references to Deloitte are references to Deloitte & Touche LLP which is among the country’s leading professional services firms, providing audit, tax, consulting and corporate finance services. Deloitte & Touche LLP is the United Kingdom member firm of Deloitte Touche Tohmatsu (‘DTT’), a Swiss Verein whose member firms are separate and independent legal entities.  Neither DTT nor any of its member firms has any liability for each other’s omissions.  Services are provided by member firms or their subsidiaries and not by DTT.  Deloitte & Touche LLP is authorised and regulated by the Financial Services Authority.  The information contained in this press release is correct at the time of going to press.