FTSE 350 defined benefit pension deficit falls to £134bn

The accounting deficit of defined benefit (DB) pension schemes for the UK’s largest 350 organisations fell from £145 billion at the end of April 2017 to £134 billion at 31 May 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 increased by £10 billion, rising to £749 billion at 31 May 2017 from £739 billion at the end of April 2017.

Liability values fell by £1 billion to reach £883 billion at the end of May 2017, compared to £884 billion at the end of April 2017.

Le Roy van Zyl (pictured), partner at Mercer, said: “With funding levels only showing marginal improvements at [the] end of May, it is too early for any sense of relief. Indeed, at times during the month, equity markets and long-term interest rates were showing renewed signs of uncertainty. With this uncertainty likely to persist for an extended period, [for example] around the Brexit outcome and the economic developments in the US, trustees and [organisations] need to reassess whether they can continue to ‘wait for better times’, given the risk of conditions actually worsening.

“The majority of risk management steps are actually more a matter of ‘when to implement’, rather than ‘should we implement’. Seen in this context, it may well be better to be more realistic about when is the right time to take action. Building a business plan around the resultant actions can then drive a significant change for the benefit of all the stakeholders.”