John Laing pension fund halves to less than £100m

John Laing plc’s massive pension fund has dropped to less than £100m.

Latest figures show that the pension fund shortfall has halved in the space of the past two years, from £186m at the end of 2005 to £92m at the end of 2007.

The company agreed to put £10m into the scheme in 2007 and proposes to lift its future contributions by 3% a year “to address the deficit over time”.

Not that this proposed scenario is guaranteed.

Laing states: “There is a risk that this increased funding rate may prove insufficient to address the deficit and/or that the [pension fund] trustees or the pensions regulator may require the deficit to be addressed over a different time period to that currently agreed by the company and the trustees, in which case there may be a material impact on the group’s financial position.”

Laing has turned to independent actuaries to devise a way forward – i.e. a funding plan that would sort out the deficit over what Laing calls “a reasonable period” while at the same time keeping the pension regulator at a safe distance.

Between 2005 and 2007, the value of Laing’s pension scheme’s assets rose encouragingly, from £640m to £680m.

The latest figure of £680m is made up of four elements:

• £270m invested in bonds – showing a rise in value of £10m over the past two years
• £230m of equities – their value dropped by £30m in the same period
• £130m in property – a rise of £20m
• £50m cash – the latest figure being £30m higher than at the start of the period

The pension scheme’s liabilities stood at £820m at the end of 2005, with the figure standing still at the same level until the end of 2006. Liabilities then tumbled to a figure of £770m at the end of 2007.

All pension funds’ liabilities figures are heavily dependent on the assumptions on such things as future inflation rates and mortality rates of the scheme’s beneficiaries.

John Laing showed that it was comfortable with the situation pension fund by feeling able to withdraw £35m from the company by way of a dividend to be paid to its shareholder owner.

Laing is owned by Henderson Infrastructure Holdco Ltd (HIH), a company managed by Henderson Equity Partners on behalf of a number of institutional investors.