Bankers’ pensions are back in black

21 Jun 2018

Stock markets reaching record highs, improving gilt yields and further contributions from sponsors pushed the retirement schemes of the UK’s largest banks into the black last year.

The average funding positions of the defined benefit (DB) schemes of Barclays, HSBC, Royal Bank of Scotland and Lloyds was 111% at the end of 2017, giving them a collective £15bn surplus.

This is the first time that the pension schemes of banks’ in the FTSE 100 were all in the black since the consultancy behind the report first examined the issue back in 2001.

The news will be welcomed by the market. A deficit is widely seen as a hidden debt by investors.

Improvements in this area will also ease the pressure on sponsors from regulators over rising cash returns to shareholders while DB schemes are hugely underfunded.

At the other end of the spectrum were oil and gas companies, which carried the highest deficits among FTSE 100 companies at £3.8bn collectively, or 96% funded.

Overall, the health of the final salary schemes of in the FTSE 100 is improving with the aggregate deficit shrinking to £5bn from £22bn in 2016.

This puts the average IAS19 funding level at 96%, a 5% rise in 12 months. However, some sponsors still have a lot of work to do with one in nine schemes having a funding level below 80%.

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