UK - Retail giant the House of Fraser is closing its £255m final salary scheme to new members while it carries out a full pension review.
The study - which is being conducted by Bacon & Woodrow - will determine the future of DB provision for active members. B&W's review is due to be completed in the next couple of months.
News of the DB scheme's closure coincides with the release of figures from the group that reveal a net FRS17 deficit of £41.4m. The £255m House of Fraser Pension Scheme currently has more than 23,000 active, deferred and pensioner members.
Sources in the City note that the pension plan is heavily invested in equities – estimates suggest an allocation of over 70% – which could add to the volatility of the scheme.
This announcement comes as end of year results for HSBC Holdings show that it had a net FRS17 deficit of $764m (£526m) on its $9.6bn HSBC Bank UK Pension Scheme – a shortfall of nearly 8% - at the end of December. The bank's disclosure also revealed that the pension fund has 77.25% of its assets invested in equities, 13.78% in bonds and 8.97% in other asset classes.
However, the bank remains unconcerned about the shortfall, noting that FRS17 only provided a snapshot view of the pension scheme and that modest returns would correct this position.
HSBC’s annual report said: “If the rate of return of the assets of the scheme is around 0.6% per annum above the assumed discount rate, that is the yield on a corporate bond rated ‘AA’ [5.9%], over the remaining lifetime of the scheme, the shortfall will be removed by outperformance.”
The report added: “HSBC considers that – bearing in mind the investment policy being followed – this represents a relatively modest level of outperformance over the long-term.”
HSBC closed its UK pension scheme to new members in 1996 moving new joiners from a non-contributory pension scheme to a money purchase scheme instead.
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