Many pension innovations stem from big schemes and work their way through to smaller schemes as the strategies become more refined and accessible.
Our second annual survey of 166 private sector defined benefit (DB) schemes in the UK with assets of over £1bn focuses on scheme type, asset allocation, investment performance, deficit contributions, and adviser fees.
Some of the highlights from below include:
- About 50% of final salary schemes in our survey are closed to new members and a further 30% are also closed to future accrual, leaving just 20% open to new members. Career Average Revalued Earnings (CARE) schemes are not far behind, with 28% open to new members.
- 80% of schemes have a deficit on their company accounting basis, versus 66% last year.
- The average annual employer deficit contribution was £75m, but ranged from £5m to £2bn.
- A significant proportion (22%) of assets have been classed as ‘other’ i.e. hedge funds and derivatives, or funds where the allocation between equities, gilts, property etc. could not easily be determined. This has actually reduced slightly from last year, though, when it was 25%.
- The average 3-year investment return was close to 12% per year (for end dates ranging between March 2012 and March 2013), whereas the 5-year return was half this at about 6% per year.
- The average PPF levy paid was £2.2m.
- The average annual investment management fee was around 0.2% of assets, which is unchanged from last year.