Defined benefit pension deficit stands at £414bn in the private sector

Charles Cowling

The deficit for UK private sector defined benefit (DB) pension schemes was £414 billion as of 30 November 2016, compared to £265 billion at the end of November 2015, according to research by JLT Employee Benefits.

Its monthly funding update also estimates that DB pension assets increased from £1,242 billion in November 2015 to £1,401 billion in November 2016, and liabilities rose to £1,815 billion in 2016 from £1,507 billion last year.

For FTSE 100 organisations, the DB pension deficit at 30 November 2016 was £160 billion, compared to £83 billion in November 2015. FTSE 350 DB deficits increased from £96 billion in November 2015 to £181 billion in November 2016.

FTSE 100 organisations’ DB pension assets are estimated at £580 billion at the end of November 2016 compared to last November’s £543 billion, with liabilities at £740 billion from 2015’s £626 billion. For FTSE 350 organisations, assets have increased from £614 billion to £656 billion, and liabilities are estimated at £837 billion compared to £710 billion at the end of November 2015.

DB pension deficits were estimated at £447 billion for UK private sector pension schemes at the end of October 2016, £197 billion for FTSE 350 organisations, and £173 billion for FTSE 100 firms.

Charles Cowling (pictured), director at JLT Employee Benefits, said: “This last month has seen a further slight easing in deficits from the record heights of over £500 billion recorded at the end of August, as markets continue to react to the fall-out from Brexit and the US election.

“However, deficits have still almost doubled over the last 12 months and there appears to be no relief in sight for [organisations] with large defined benefit pension schemes. Moreover, any current calm in markets may just be a temporary ‘eye-of-the-storm’ respite before the Brexit negotiations start in earnest.

“As we rapidly approach the all-important year-end, at current market levels, many [organisation’s] accounts are going to show a marked deterioration in their year-end pension numbers. There will be instances where the pension scheme will represent a serious threat to the [organisation’s] balance sheet and, in some cases, its ability to pay dividends. There are going to be many finance directors hoping that the recent rise in bond rates continues a little further before the end of 2016.”