International

By Natalie Cogan
Thu 29 Jul 2010

BT faces new challenge; Deficits in top US pensions near high; Canadian pension fund targets UK company

Mercer earns BT mandate
The United Kingdom's biggest telecommuications group has engaged investment consultant, Mercer, to provide advice and research on manager selection and asset allocation for its pension fund.

BT operates one of the largest pension schemes in the UK with assets in excess of £32 billion ($55 billion).
Working with BT Pension Scheme Management (BTPS), Mercer will advise on mandate construction across a range of equity and fixed income portfolios and work on implementation for certain assets.
BTPS head of investments Frank Naylor said Mercer's ability to execute as well as advise was key in appointing them. "We were impressed with the breadth of Mercer's capability, and their desire and commitment to work with us as a strategic partner differentiated them from their competition," Naylor said.

BT faces new pension challenge
BT faces a new challenge in reducing its £9 billion ($15.5 billion) pension deficit as British telecoms regulator, Ofcom, rejected a proposal to increase service charges to help stem the gap.
The telecommunications group argued it should be allowed to factor in the cost of its £525 million ($902.1 million) top-up payments to its defined benefit scheme into the wholesale charges it levied on competitors, BSkyB, Cable & Wireless Worldwide and TalkTalk, for using its network.
In a preliminary ruling, Ofcom said it had not received "compelling evidence" to justify any hike in charges, which could be passed on to consumers as well as competitors, but it would make a final decision by the end of the year.

Deficits in top US pensions near high
The deficit in pension plans sponsored by S&P 1500 companies reached US$451 billion ($508.4 billion) at the end of June, just US$1 billion ($1.13 billion) shy of the previous deficit record set in January 2009, according to new data from investment consultant Mercer.
An overall increase of US$115 billion ($129.64 billion) in June left the plans with a funding status of 73 per cent, down from 78 per cent at the end of May and 84 per cent at year end 2009, with a US$247 billion ($278.4 billion) deficit.
A 5.4 per cent fall in equity values in June adversely affected assets, still largely held in stocks, while AA bond yields fell by around 40 basis points over the same period, increasing plan liabilities.
"The combined effect of the fall in equity values and the fall in AA bond yields is a five percentage point decline in funded status and may come as a surprise to many plan sponsors," Mercer financial strategy group partner Adrian Hartshorn said.
The estimated aggregate value of pension plan assets of the S&P 1500 companies at the end of 2009 was US$1.25 trillion ($1.4 trillion), with estimated liabilities of US$1.5 trillion ($1.7 trillion).

Xafinity buys PWC pension business
Xafinity has made its second acquisition in the pensions market, buying PricewaterhouseCoopers' (PWC) United Kingdom trustee pension scheme actuary, trusted investment consulting and scheme administration client business.
The company bought pensions administrator Hazell Carr in April 2008 and was itself the subject of a secondary buyout by private equity group Advent International from Duke Street Capital for US$307 million ($346.1 million) earlier this year. The consultant and software group handles £2 trillion ($2.25 trillion) annually in employee benefits and is behind the pension administration software platform, Compendia.
PWC will no longer provide trustees with scheme actuary and scheme administration services, but said it would continue to provide pensions advice to corporate sponsors and trustees.
"We firmly believe that the trustee clients and the PWC people transferring will benefit from the ongoing investment that Xafinity is making in building its trustee business," PWC partner Michael Rendell said.

Canada Pension fund targets UK company
Aided by a weaker British pound, Canada's federal pension group, the Canada Pension Plan Investment Board (CPPIB), and Canadian buyout firm Onex have launched a bid to buy British auto parts manufacturer Tomkins for an estimated £2.9 billion ($5 billion).
With assets of US$127 billion ($141.7 billion) under management, CPPIB has ramped up its private equity investments in the past year. The group recently completed a US$5.2 billion ($5.8 billion) acquisition of United States pharmaceutical intelligence group IMS Health with TPG Capital and launched a second bid for Australian toll road operator Intoll this month worth US$3.1 billion ($3.46 billion).

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