The aggregate FTSE100 pensions surplus has expanded from £10bn at the start of 2021 to £59bn at the end of the year, and is now over £100bn, according to LCP.
According to LCP’s latest annual review of the position of the FTSE100 pension schemes, FTSE100 businesses could be sitting on an extra £10bn in pension “hidden” surplus as a result of the pandemic’s long-term impact on life expectancy, which could result in a 2 per cent reduction in liabilities.
According to the report, this is “hidden” because many businesses are still unaware of the impact on their financial statements. LCP expects to see a rise in the number of corporations making such a provision this year, which will help to improve the overall situation.
The FTSE100’s pension liabilities have increased by £40bn as a result of current high inflation and rising projections for future inflation. But assets held by pension funds will likely counterbalance this rise to some extent, reducing the impact on company balance sheets. Because of the restrictions on pension increases, many schemes’ assets will have grown faster than their liabilities.
LCP partner and author of the report Jonathan Griffith says: “At first glance, the takeaway from this year’s report is that this is job done and FTSE100 pension schemes are now an asset for UK Plc. Whilst it’s clearly good news that more schemes are now in surplus, with rising inflation, a potential recession and a new funding code on the horizon, scheme sponsors need to make sure that they understand how much of a surplus they really have, how to manage it, and think about how they best buffer their schemes against the headwinds to come.”