Balfour Beatty accelerates DRCs after share buyback

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The £4.3bn pension fund of construction company Balfour Beatty negotiated accelerated deficit funding last year, receiving £20m earlier than originally planned after a company share buyback.  
 
In spring 2021, the sponsoring employer agreed with the trustees to accelerate part of the deficit funding of £93m, which meant the fund received £20m in March 2021, ahead of the original schedule. The recovery plan aims to remove the £144m deficit by 2023. 
 
Balfour Beatty said accelerated contributions were agreed because of a share buyback programme, along with additional deficit contributions of £2m per month from July 2022 until the 2022 valuation is completed or September 2023 at the latest. The scheme will receive £39m this year, and the construction company is expecting to make a further deficit contribution of £18m next year. 
 
The scheme was 97% funded at its last funding update, a level which has remained largely unchanged since 2019, and it aims to be fully funded next year. Balfour Beatty said the scheme is aiming to reach self-sufficiency by 2027. 
 
During 2021, the trustees had also decided to take less risk within the investment strategy, “in part given the increased market volatility brought about by the COVID-19 pandemic”, they said. The target return for the portfolio, which is managed by Willis Towers Watson, was therefore reduced, and the proportion invested in liability hedging assets increased by 5%. 
 
The fund, which has 17,600 pensioners, 10,016 deferreds and a single active member, holds nearly half of its assets in a liability hedging portfolio. About a quarter (26%) of assets is invested in alternatives, 15% in credit and the remaining 10% in equities. 
 

TCFD preparations are underway 

 
Elsewhere, the scheme is preparing for new rules applying to £1bn plus schemes from October this year, which will which require it to publish a report in line with the Taskforce on Climate-related Financial Disclosures. The fund’s size means it falls just below the £5bn threshold for pension funds having had to do so since October last year. 
 
The trustee said the scheme is well prepared. "The concept of sustainable investment is not new to the BBPF. It has for many years been an integral part of the approach used in managing the BBPF’s assets,” they said. 
 
There are still a few months until the scheme has to publish its first report, but “the trustee is working with its advisers to ensure it is taking all appropriate steps to assess and manage climate related risks, and is well positioned to fulfil its new responsibilities ahead of these formally taking effect”, the scheme said. 
 

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