FTSE 350 defined benefit pension deficit reaches £137bn

Pension piggy

The accounting deficit of defined benefit (DB) pension schemes for the UK’s largest 350 organisations increased from £39 billion at the end of 2015 to £137 billion at the end of December 2016, according to research by Mercer.

Its Pensions risk survey, which is based on analysis and projections of FTSE 350 organisations’ financial statements adjusted from their financial year end, also found that the accounting deficit for DB pension schemes increased by £10 billion between the end of November 2016 and 30 December 2016.

Asset values increased by £19 billion, rising from £701 billion on 30 November 2016 to £720 billion on 30 December 2016. Liability values rose by £29 billion, reaching £857 billion at the end of December 2016 compared to £828 billion at the end of November 2016.

At the end of December 2015, asset vales were £634 billion and liabilities were £673 billion.

Le Roy van Zyl, senior consultant at Mercer, said: “Pension scheme trustees and sponsors face the new year with significant uncertainty. Brexit is likely to move beyond a mere intention, and the effect of new leadership in the US will become clear, not to mention other major events such [as] the French presidential elections.

“If we look at how volatile conditions have been, and how volatile they may well continue to be, schemes will have to be responsive on a variety of issues. In this environment, best outcomes will be achieved by tackling covenant, funding and risk management together. It will be especially important to focus on future cash flow requirements in different scenarios.”