University pension schemes’ funding levels drop

The average FRS17 funding level of university final salary pension schemes has dropped from 81% to 73% in the last five years, according to a survey of self-administered trusts (SAT) by Barnett Waddingham.

The survey, which is based on data in the published accounts of 26 universities with financial years that ended on 31 July 2009, focuses on the impact of final salary pension schemes on universities’ finances.

The survey cites significant increases in inflation expectations, increased life expectancy, and a decrease in the value of equities during 2008 and 2009 as the main reasons for the decrease in funding levels.

The pensions deficit represents an average of 13% of the net assets of the university (excluding the pension deficit) and SATs contributions represent an average of 3.1% of total staff costs.

Nick Griggs, partner at Barnett Waddingham, said: “The survey shows pensions are becoming an even more significant part of a universities finances.

“With university funding cuts and the likelihood of upward pressure on pension contribution rates it will be important schemes are managed effectively. It will be interesting to see how things develop when the survey is run next year.”

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