UK - The Merseyside Pension Fund is in a deficit of £1bn (US$1.98bn), according to its latest actuarial valuation.
It stated that based on the assumptions made for assessing the cost of future accrual, the average employer contribution rate was 12.1% of pensionable pay.
However, if assumptions were to be based purely on returns available on conventional and index linked gilts, the deficiency would be as high as £2.5bn.
It also said if the deficit were to be recovered via the employer contributions, then that contribution would rise to a whopping 17.8% of pensionable pay per year.
The report, compiled by Mercer, said it was not possible to construct a portfolio of investments which produced a stream of income exactly matching the expected liability outgo. But it added it was possible to construct a portfolio which closely matched the liabilities and represented the least risk investment position.
It said such a portfolio would consist of mainly long term index linked and fixed interest gilts. It said the greatest risk to the funding was the investment risk inherent in the equity based strategy.
The target asset allocation for the £4.3bn fund includes 31% UK equities, 25% overseas equities, 10% bonds, 2% cash, 26% fixed income and 6% in venture capital/other investments.
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