On the go: The total deficit of FTSE350 companies’ defined benefit pension schemes increased to £45bn from £41bn at the end of February. The move was caused by an increase in liabilities to £811bn from £806bn, partially offset by asset values increasing to £766bn from £765bn, according to Mercer figures released this week.
Commenting, Maria Johannessen, partner at Mercer, said: “It is disappointing to see the pension gap increase in February, having held steady in January. A £1bn increase in asset valuations wasn’t enough to offset a big rise in liabilities driven by an increase in market-implied inflation alongside a small fall in corporate bond yields.”
LeRoy Van Zyl, a strategic advisor and partner at Mercer, added: “Funding level volatility is set to continue over an important few weeks for British politics, alongside an uncertain global economic environment. As the UK edges closer to the Article 50 deadline, it’s important both trustees and scheme sponsors take the time to fully understand the risk they’re running and are prepared to take action to ensure it falls within their risk appetite.”
Mercer’s data relates to about 50 per cent of all UK pension scheme liabilities and analyses pension deficits using the approach companies have to adopt for their corporate accounts.
Meanwhile PwC’s Skyval Index paints a slightly different picture. Monitoring 5,450 of the UK’s DB pension funds, it showed a decreased deficit. The deficit of DB pension funds stood at £200bn at the end of February 2019, down £10bn from the previous month end.
It calculated that DB assets stood at £1,610bn with liabilities at £1,810bn based on formal accounting standards (such as IAS19).
Steven Dicker, PwC’s chief actuary, said: “The funding levels of UK pension schemes have improved slightly over February. Although liabilities increased over the month, positive asset performance helped improve the overall funding level.”
