FTSE 350 pension scheme deficits increase to £81 billion

The Pensions Regulator orders former chief executive to pay back £286,852

The accounting deficit for defined benefit (DB) pension schemes at the UK’s top 350 FTSE organisations increased by £5 billion to £81 billion in May this year, up from £76 billion in April 2021.

According to Mercer’s Pensions risk survey, which analysed pension scheme deficits calculated using the approach organisations have to adopt for their corporate accounts, the rise was driven by an £9 billion boost in liabilities. Liability values rose from £875 billion at the end of April to £884 billion at the end of May, aided by a fall in corporate bond yields and a small increase in inflation expectations.

Asset values rose by £4 billion during the same time period, increasing from £799 billion at the end of April to £803 billion.

Tess Page, partner and UK wealth trustee leader at Mercer, explained that the survey data relates to about 50% of all UK pension scheme liabilities and the data underlying the research is refreshed as companies report their end of year accounts.

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She said: “In its 2021 Annual Funding Statement, the Pensions Regulator issued a clear call to action on the need for an integrated approach to managing funding and investment risk that reflects the employer’s covenant and incorporates a path towards a long-term objective.”

Page added: “We are all starting to feel optimistic about the easing of restrictions, but in a post-crisis world trustees need, more than ever, to understand what level of cash contributions employers can truly afford and where their risks lie. Aligning all stakeholders on a path toward a long-term objective must be the focus as we emerge from lockdown life.”