Financial Health of the DB Section

A summary of the DB Section’s financial highlights along with a summary of its investments and performance for the 12 months to 5 April 2018 is shown below.

DB Section's financial highlights

Net assets at 6 April 2017


Contributions received (including Company contributions and additional member contributions)


Transfers received - Other income


Benefits and payments payable (including pensions, related benefits and administration expenses)


Net return on investments


Net assets at 5 April 2018


Figures in brackets are negative.

DB Section investments

The investment policy for the DB Section of the Scheme is determined by the Trustee in consultation with the Principal Employer and Willis Towers Watson Limited, the appointed investment consultant.

The investment objective set by the Trustee is to achieve a target level of investment return whilst minimising the amount of risk taken. In doing this, the nature and duration of the Scheme’s liabilities are taken into account.

The current DB Section asset allocation benchmark at 5 April 2018 is set out in the graph shown below.

* Liability matching assets consist of Fixed Interest Index-Linked Gilts, Corporate Bonds, Cash and Swaps.

Changes to the asset allocation benchmarks over the period

The Trustee regularly reviews, and if necessary adjusts, the investment allocations to meet the Scheme’s investment objectives. During the year the Trustee reduced the benchmark allocation to Equities to 1.3% and increased its allocation to Distressed Debt Opportunities to 1.7%. In addition, the benchmark allocation to the Companies Financing Fund was reduced zero.

Investment performance

Allowing for income, capital gains and movements in market values, the return on the Scheme’s DB Section assets for the 12 months to 31 March 2018 was 1.5% which was 0.4% above the benchmark return.

During the period there were positive returns from all the Scheme’s underlying mandates, most notably the Scheme’s equity and private debt holdings. Credit spreads also tightened over the year, resulting in outperformance from the Scheme’s credit holdings.

The absolute returns achieved over longer periods, together with the Scheme’s benchmark returns, are shown below.

Period to 31 March 2018

1 year

3 years

5 years

DB Section return (% per annum)




Benchmark return (% per annum)




Please note: The investment performance is measured at a different date to the assets being valued for accounting purposes. This year there was a significant change to the bond yields between these two dates, as a result the investment return shown in the Scheme financial highlights on page 3 differs from the performance figures shown above.

Market commentary

Despite a wobble at the start of 2018, equity markets performed strongly over the Scheme year on the back of growing economic optimism (although the strength of sterling against the dollar meant that international equities returned significantly more than those in UK companies).

Similarly, inflation (as measured by the Consumer Prices Index or CPI) in the UK climbed steadily to 3% by the end of 2017 before then declining quickly to 2.5% by the end of March 2018. This was at odds with a more stable global inflation position.

The first rise in the UK interest rate for ten years, following on from three increases in the US, made things tougher for bond markets. Non-government bonds generally did better than government bonds but, overall, yields remained close to the lows of the previous 20 years. However, UK commercial property continued to recover and finished the period above the pre-Brexit referendum highs.

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