(March 19, 2013) — The burden of pension funds on universities’ assets in the United Kingdom increased by a quarter in 2012, as declining bond yields put pressure on liabilities, research has found.
Pension fund deficits amount to an average 10% of net university assets for UK institutions, consulting firm Barnett Waddingham has found in an annual survey of the sector. This increased by a quarter from figures published in last year’s survey.
“With University Self-Administered Trusts (SAT) pension deficits now accounting for an average of 10% of a university’s net assets, SATs are becoming an increasingly important area,” said Nick Griggs, partner at Barnett Waddingham. “They represent a significant financial risk, particularly given the high equity allocation, compared to other sectors, many SATs hold.”
The funding levels of the universities surveyed by the firm fell from an average 81% in 2011 to 77% at the end of their fiscal year – July 31 – in 2012. The fall, Barnett Waddingham said, was mainly attributable to the strengthening of financial assumptions following a fall in bond yields.
The average deficit was around £42 million per SAT, up from £34 million in 2011.
“The news that average funding levels for university pension schemes have fallen is a trend we are seeing across all sectors,” said Griggs. “The concern is that this will push even more universities to close their schemes to future accrual.”
SATs cover pension arrangements for non-academic staff.