Pensions advisory

Pensions advisory updates

A series of regulatory updates and sector-specific market overviews with a focus on the specific implications for pension schemes.

Annual funding statement and Tranche 12 analysis (PDF, 168kb) - June 2017
The Pensions Regulator’s annual funding statement includes important messages for trustees and employers of all defined benefit schemes. The intention is clear: TPR is planning to take a more proactive and interventionist approach to raise scheme management and governance standards.

Manufacturing – October 2016
UK manufacturing is facing a number of challenges in the wake of the referendum vote to leave the EU. A weaker pound, uncertainty around future access to the EU single market, and a skills shortage which could be worsened by post-Brexit immigration policy, are likely to impact the employer covenant. At the same time, deficits continue to widen as gilt yields fall to record lows.

Aviation - September 2016
The UK aviation sector is facing a number of challenges, including continuing pressure on profit margins and growth plans being revised in the wake of the UK's referendum vote to leave the EU. Pension schemes in the sector are having to adjust to even lower returns and, in some cases, a potentially weaker employer covenant.

Pharmaceuticals - August 2016
Pharmaceutical companies faced a number of challenges in the first half of 2016. Following the UK's referendum vote for Brexit, many employers in the sector are now facing potentially significant market and regulatory upheaval. Following the economic and political fall-out from the Brexit vote, some pension schemes could face higher risks relating to funding, investment and the employer covenant.

Brexit - July 2016
The UK's vote for Brexit has sent shockwaves throughout the economy. Many employers are now facing a changed industry outlook, and are having to cope with on-going uncertainty in the markets in which they operate. Pension scheme trustees are concerned that their employer covenant is weakening, and that sustaining their current level of deficit repair contributions (DRCs) is now increasingly unrealistic.

Transport & logistics - June 2016
The oil price decline continues to benefit the overall Transport & Logistics industry, although the picture for individual sectors is mixed. While airlines are performing strongly, shipping companies are facing a prolonged downturn due to excess capacity and sluggish world trade. Pension schemes are advised to understand how key market developments, such as rising competitive pressure and squeezed margins, are impacting the employer covenant.

Financial Services - May 2016
Increased competition from new entrants and online players, together with the growing importance of fintech, are challenging the dominant position of the large established banks and insurers. There is uncertainty around the upcoming Brexit referendum and the potentially negative impact on the UK's financial sector in case of a 'leave' vote. Pension scheme trustees should ensure they understand the potential implications for the employer covenant. 

 Manufacturing – March 2016
UK manufacturing has started this year on decent footing, with strong domestic demand being a key driver. Weak global demand combined with a strong pound have however been a continuous dampener on the sector's exports, although the recent fall in Sterling could provide a short-term boost. Pension scheme trustees are advised to understand how emerging trends such as greater automation or a potential UK exit from Europe ('Brexit') will impact the employer covenant. 

Construction and Engineering - February 2016
The construction sector has slowed down again despite a strong finish in 2015. Nevertheless the outlook is positive for the first half of 2016, driven by a strong
pipeline of housebuilding and infrastructure projects. Pension schemes are advised to monitor the employer covenant, and to understand how key growth drivers for the sector are impacting the covenant.

Oil and Gas - February 2016
The sector's woes show no signs of waning in the first half of 2016, with oil prices falling by nearly 75% in the last 18 months. Insolvencies are on the rise across the supply chain, and the oil supply glut is likely to be exacerbated by Iran's re-entry on the international market. Pension schemes in the sector who are concerned that their employer covenant is weakening should ensure covenant assessments are forward-looking and that an integrated risk management framework is in place. 

Retail - February 2016
Retailers are facing a heady mix of challenges in the first half of 2016. Many employers are facing fundamental shifts in their business model and are having to invest in new capabilities to ensure future growth. Pension schemes are becoming increasingly concerned that their employer covenant is potentially weakening, and that sustaining their current level of deficit repair contributions (DRCs) is becoming unrealistic. 

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