Xps Pensions Share Discussion Threads

[johnrxx99] 18/7/2024 08:18

More FTSE-listed companies look to access pension surpluses - FT 16 July


Growing numbers of FTSE-listed companies are looking to unlock pension fund surpluses in an emerging trend that could lead to billions of pounds being returned to employers in the coming years.

Defined-benefit plans — which promise guaranteed retirement payouts to members — were once commonplace in the UK private sector but were replaced by riskier defined-contribution plans, deemed less expensive for employers to run.

Employers with DB plans have traditionally targeted arrangements where they pay an insurer to take over responsibility for pension payments.

But a dramatic improvement in scheme funding positions in recent years is leading more employers to pause buyout plans and instead consider “running on” their scheme to access surplus that has accrued, according to consultants.

“The question of the hour is what schemes are doing with that surplus,” said Matt Tickle, chief investment officer with Barnett Waddingham, who estimates that about £45bn of surplus is sitting in FTSE 350 company pension funds. “For most, buyout via an insurer is still a sound decision — but in a recent survey we found that one-third of schemes are already considering whether running-on is a viable option.”
Line chart of showing UK pensions plans swing from deficit to surplus

Driving the rethink is a sharp improvement in funding positions of the just over 5,000 corporate DB pension plans in the UK.

A significant increase in bond yields since September 2022’s gilt crisis has reduced the value of pension scheme liabilities, more than offsetting a corresponding fall in scheme assets.

About 90 per cent of 5,050 private sector DB pension schemes are in surplus, up from 57 per cent of 5,200 plans in 2021, according to Pension Protection Fund analysis, with an aggregate surplus of roughly £469bn in May this year.

Aon, the global professional services firm with 6,000 staff in the UK, is taking steps to make use of a “substantial” surplus that has built in its DB plan.

With the support of the scheme’s trustees, the company is consulting with staff on changes that would allow the DB surplus to be used to meet contributions costs in its defined contribution retirement plan, potentially amounting to “tens of millions”.

“This does require trustee agreement in most cases but it doesn’t need new legislation,” said John Harvey, partner with Aon. “The immediate benefit is to Aon’s cash flow.”

Harvey added there were no current plans for Aon to use the surplus for anything other than funding the pension bill for the DC scheme. The group’s move comes as the market for insurance buyouts remain strong, with a record £50bn in deals expected to be brokered this year, according to actuarial consultancy LCP.

“At some point we still intend to insure, this isn’t a forever decision,” he said.

XPS, which provides pension advice to FTSE-listed companies, said it had implemented “surplus extraction” for two of its clients at the “larger end of the market”, with the freed cash also used to fund DC pension contributions.

“In one case, the surplus was large enough to fund DC contributions for the next 10 to 15 years,” said Tom Froggett, partner with XPS, adding that surplus extraction was “the hot topic of the moment among trustees and schemes”.

While some employers have made moves to extract surplus, many employers are awaiting further direction from the newly elected Labour government before deciding their position on surplus.

An XPS survey in May this year, representing 300 schemes with £420bn in assets, found 57 per cent of employers would look to run on their schemes to use surplus if the government introduces legislation that allows them to override their existing scheme rules to permit surplus extraction.

“The pensions industry is waiting to see what the next government does,” James Chemirmir, pensions director at Kingfisher told the Financial Times.

“Only then will we know the range of options available as to how future surpluses could be used.”

While surplus extraction may be the subject of more boardroom discussions, running a scheme on would mean that it remained on the employer’s balance sheet.

“Ultimately, any employer that is considering a run-on strategy will need to weigh up the benefits of doing so against the risks,” said Froggett.

“They need to be comfortable that the net position is favourable.”

[johnrxx99] 09/7/2024 07:04

New Funding and Investment Strategy Regulations Report

08 Jul 2024

At their next valuation on or after 22 September 2024 all defined benefit (DB) pension schemes need to set a funding and investment strategy in line with new regulations. Trustees and employers will rightly be focussed on the major decisions and, importantly what the right strategy path may be for their DB scheme (e.g. buyout or run-on).......

[disc0dave46] 08/7/2024 17:30

Directors aren't though!

[robsy2] 01/7/2024 18:38

The index trackers are buying in it seems?

[johnrxx99] 01/7/2024 15:37

Very lively day and a nice breakout so far today

[johnrxx99] 26/6/2024 10:31

Someone unloaded 1m shares at 300p in three tranches. 2p not much of discount.

[johnrxx99] 24/6/2024 15:29

Blackrock increase by 0.5%

[johnrxx99] 22/6/2024 01:43

Deutsche Bank raises XPS Pensions target to 330 (310) pence - 'buy'

[rik shaw] 20/6/2024 08:29

Yes excellent results. If this year brings more growth the share price should continue to increase. Joining the FTSE 250 should also help.

[johnrxx99] 20/6/2024 07:13

Paul Cuff, Co-CEO of XPS Pensions Group, commented:

"We are delighted to announce another year of record growth, encompassing multiple financial upgrades during the period. Our prior year was strong too, so to carry on our positive momentum and achieve total group revenue growth of 21% is really pleasing. It is also great that this was achieved with double digit growth in every one of our core divisions - actuarial, investment consulting, administration, and our SIP business.

We have seen continued growth in areas that we have invested in, such as our risk transfer team, and in services that we provide directly to insurers. We have also enjoyed playing an active role in the debate about the future of our industry in the new age of better funded defined benefit schemes; we look forward to continuing to advise our clients on the full range of strategic options available to them against the backdrop of changing regulations that are coming their way.

Earlier this month, we were delighted to learn that XPS will be joining the FTSE 250. It is a very proud milestone for us, achieved through the hard work of our colleagues and the support of our clients and shareholders. There is much yet to come and we remain very excited about the next stage of our journey.

[johnrxx99] 20/6/2024 07:12

Excellent results for all metrics. The figures are either on or above concensus, well my figures version of them, and dividend up by 19% YOY.

[johnrxx99] 19/6/2024 08:18

New high yesterday and results tomorrow.

[johnrxx99] 11/6/2024 08:02

Well spotted M9999. Good to see they are backing up DB

[melody9999] 11/6/2024 07:53

RBC RAISES XPS PENSIONS GROUP PRICE TARGET TO 315 (270) PENCE - 'OUTPERFORM'

[johnrxx99] 30/5/2024 06:45

Some more good news, moving up to the FTSE 250 on the next update. Trackers will have to buy.

[johnrxx99] 08/5/2024 08:04

Deutsche Bank starts XPS Pensions group with 'buy' - price target 310 pence

[johnrxx99] 03/5/2024 09:35

Just as I was thinking of topping up, it jumped 6%, bloody ridiculous

[johnrxx99] 28/4/2024 05:12

Several stocks act that way, FOUR for example. It's seems to be market makes playing with spreads as well as trades.

[melody9999] 27/4/2024 22:06

yep - share price moves in some funny ways. can be affected by individual sales early on.

[hawaly] 26/4/2024 16:21

This was down >5% at the open .... 🤔😉

[johnrxx99] 21/4/2024 05:19

Yes, it may not rise rapidly but to my mind a solid investment case for the moment. Companies will always want to offer key staff a credible pension but without the management hassle.

[melody9999] 18/4/2024 16:22

Just added a few more at 243p. Good chart support around 240 on the chart...

From last TU, Canaccord increased TP to 298p from 280p. "We forecast 11% and 7% revenue growth in FY25E and FY26E, respectively. Given strong management of the cost base, we expect incremental revenues to drop through to profitability, resulting in 5-6% upgrades to our adj.dil EPS forecasts"

And this is on top of earlier upgrades. happy days.

[johnrxx99] 11/4/2024 07:08

Excellent trading update.

"High levels of demand for our services from continued regulatory change, new clients, and the inflation-linkage of our contracts, combined with the resilience and predictability of our business model has driven the robust performance for the year. Growth drivers in the year include GMP equalisation, rectification projects following the McCloud judgement, and the impact of new business wins in the Risk Transfer market. We expect work in each of these areas to provide a strong underpin for growth in FY25. We will also have some new client wins coming on stream in FY25, including most notably our appointment to provide pensions administration to the John Lewis Partnership pension scheme. There are further regulatory tailwinds to come with the introduction of the new General Code of Practice (effective end of March 2024) and the new Funding Code of Practice (likely effective September 2024) both of which will impact all our defined benefit clients driving demand for our services.

Costs have been managed well and the Board expects operational gearing to have improved, and thus is confident of achieving full year results ahead of its own previously upgraded expectations.

[johnrxx99] 10/4/2024 15:35

Blackrock have increased to over 5%.