FTSE 350 defined benefit pension deficit falls to £131bn

Le Roy van Zyl

The accounting deficit of defined benefit (DB) pension schemes for the UK’s largest 350 organisations fell from £134 billion at the end of May 2017 to £131 billion at 30 June 2017, according to research by Mercer.

Its Pensions risk survey, which is based on projections and analysis of FTSE 350 organisations’ financial statements adjusted from their financial year end, also found that asset values fell by £11 billion to reach £738 billion at 30 June 2017, compared to £749 billion at the end of May 2017.

Liability values fell by £14 billion from £883 billion at the end of May 2017 to £869 billion at the end of June 2017.

Le Roy van Zyl (pictured), partner at Mercer, said: “The drivers affecting pension fund finances are still volatile. For example, towards the end of the month funding levels were supported significantly by improving long term interest rates. Given that we have had such improvements before, only for rates to subsequently deteriorate again, trustees and sponsors need to decide whether to lock in some of this good news. Some may have programmes in place already to de-risk as soon as conditions improve, but these are quite possibly out of date.

“With changes in economic outlook, developments in a sponsor’s financial position, and the fluctuating attractiveness of other sources of risk, a different de-risking action may be appropriate. Indeed, it may be appropriate to replace a scheduled action with another that better fits the current circumstances and views. Under an integrated risk management framework it is important that regular review takes place across the range of areas being pursued.”