FTSE 350 DB pension deficit increased in June

The accounting deficit of defined benefit (DB) pension schemes in the UK increased marginally over the month of June, according to research by consultancy Mercer.

Its Pensions risk survey found that the estimated aggregate IAS 19 pension deficit for the DB schemes of FTSE 350 companies stood at £73 billion at 30 June 2012, compared to £72 billion at the end of May and £61 billion at the end of December 2011.

Ali Tayyebi, senior partner and pension risk group leader at Mercer, said: “The overall deficit has remained at close to £70 billion at each of the four month ends since 31 March 2012, having increased from £61 billion at the end of 2011.

“However, behind this apparent stability there has been significant volatility between the month-end points.

“For example, deficits reached £94 billion during May before being rescued by a fall in expected long-term inflation. During June, deficits moved between a low point of £67 billion and a high point of £82 billion over an 11-day period, representing a near 3% swing in funding levels.

“Although these are numbers used for company accounting purposes, the broad picture would be similar on assumptions, which pension scheme sponsors and trustees use for funding purposes.

“In turn, this highlights the importance of being able to act quickly if pension scheme de-risking strategies are based on funding level changes.”

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