In our latest Pensions Support Index ("the Index") we analyse the changes in the Index during the first half of 2012.
The Index tracks the ability of FTSE 350 companies with Defined Benefit pension schemes to support their collective pensions obligations.
The downward trend in the Index during 2011 has stabilised during the first half of 2012. But, the Index is almost 15 points lower than the level achieved in mid-2007.
Our senior economic adviser and former member of the Bank of England Monetary Policy Committee, Andrew Sentance, has considered this stabilisation in the Index, in the context of the broader economic environment and structural shifts in the global economy, the 'new normal’. He believes there is a need for a reappraisal of pension fund investment strategies relative to the 'old normal' rules which prevailed pre-2007.
The Index also shows a growing divergence between strong and weak companies when looking at individual company scores. This highlights the importance of assessing covenant when formulating a scheme’s financial management plan, and suggests an approach for preparing financial management plans for individual schemes.
In the report, we examine what all of this will mean for companies, trustees, scheme members and other stakeholders.