Defined benefit pension funding deficit falls to £460bn

Pension drawer

The funding deficit for defined benefit (DB) pension schemes in the UK was £460 billion at the end of June 2017, according to research by PricewaterhouseCoopers (PWC).

Its Skyval index, which is based on data relating to 5,800 DB pension funds and collected through the Skyval pensions platform used by trustees, sponsors and advisors, found that the funding deficit for the UK’s DB pension schemes fell by £50 billion between May 2017 and June 2017.

At the end of June 2017, pension assets were £1,550 billion, and the liability target was £2,010 billion, according to the current funding measure, which is used by pension fund trustees to determine organisations’ cash contributions.

Steven Dicker, chief actuary at PWC, said: “June saw an almost 10% reduction in the headline funding deficit across schemes. This was largely due to a small increase in long-term real interest rates, i.e. interest rates relative to inflation, as measured by government bond yields.

“This was a bigger move than in some recent months and continues to illustrate the sensitivity of this type of deficit calculation to even modest market movements.

“With continuing political and economic uncertainty, deficits calculated on this basis are likely to remain volatile.”