Strength of funds highly variable

THE FINANCIAL strength of leading UK pension funds varies widely, according to a new index devised by Coopers & Lybrand, writes Paul Durman.

The firm has drawn up a benchmark of actuarial assumptions by taking the median values of those actually used by 53 of the largest 100 pension funds. Giving the average scheme a value of 100, the index of financial strength ranges from 83 to 160. Only one pension fund scored a reading of more than 135.

Coopers & Lybrand believes its index will allow finance directors and trustees to compare the assumptions they use against those of the average pension scheme.

The median assumptions include real investment returns of 4.25 per cent a year, real growth in pay of 2 per cent a year, and dividends lagging the retail price index by 0.25 per cent a year. Coopers & Lybrand found little evidence of pension funds moving out of equities and into lower-risk assets in recognition of the general increase in the number of pensions in payment.