The Merchant Navy Officers Pension Fund (MNOPF) has reported a steady increase in its funding level over the past four years, a period over which most UK pension scheme deficits have ballooned because of record-low gilt yields.
MNOPF said it bucked the trend because its investment strategy, implemented by Willis Towers Watson as the scheme’s delegated chief investment officer (DCIO), had enabled the funding level improve from 68.9% in March 2012 to more than 81% at present.
Figures by the Pension Protection Fund (PPF) revealed UK defined benefit (DB) scheme deficits hit their lowest ever level in August following the Bank of England’s reduction in interest rates, from 0.5% to 0.25%, and its increase in asset purchases as part of its quantitative easing (QE) programme.
At that time, the aggregate deficit for the UK’s 5,954 DB schemes increased from £376.8bn at the end of July to £459.4bn at the end of August – a funding level drop from 79.2% to 76.1%. However, the PPF’s latest figures revealed the aggregate funding ratio had improved to 88.1%, as at end of November.
MNOPF said a significant contributor to its improved funding position had been its level of liability hedging which the scheme has in place as part of a wider journey plan targeting a 103% funding level by 2025.
And it said the success of the investment strategy had saved its sponsoring employers about £300m in contributions, which would have had a material impact on their sustainability.
MNOPF communications director, Phil Boyle, said: “This improvement in the MNOPF’s funding position is testimony to the fund’s high standards of governance, investment strategy and risk management. As a result our members enjoy greater security of their pensions, and our employers are benefitting from significant savings in pension contributions.”
The MNOPF originally comprised two sections: the old section for pre-1978 benefits and the new section for benefits accrued thereafter. The old section was wound-up in 2014 following a series of buy-in transactions in 2009, 2010 and 2012.
The new section closed to future accrual on 31 March, at which point remaining members were enrolled into the Ensign Retirement Plan. From then on, MNOPF has had two sections: a DB scheme (the former ‘new’ section) and a DC scheme (the Ensign Retirement Plan).
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