FTSE 350 defined benefit pension deficit rises to £83bn

Le Roy van Zyl

The accounting deficit for defined benefit (DB) pension schemes at FTSE 350 organisation increased from £71 billion at the end of July 2017 to £83 billion at 31 August 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 liability values reached £855 billion at the end of August. This compares to £828 billion at the end of July 2017.

Asset values increased by £15 billion between the close of July and end of August 2017, rising from £757 billion to £772 billion.

Previous Pensions risk survey data has been updated in line with published accounting information for organisations with 31 December 2016 year ends, and to take into account changing market conditions.

Le Roy van Zyl (pictured), strategic advisor and partner at Mercer, said: “Unfortunately, the run of good news ended over August with the deficits increasing again materially, albeit still far off the painful numbers we saw a year ago in the aftermath of the EU referendum.

“With the Brexit negotiations now underway in earnest, there is considerable scope for people’s expectations to be frustrated, and the setback above may well be partly due to the general uncertainty. Pension scheme trustees and sponsors will need to be prepared for the fluctuating circumstances, not only in terms of scheme finances and risk, but also around the challenges of making effective decisions against this uncertain backdrop.

“A range of outcomes are possible and it is key that schemes work through some scenarios to establish whether there are material dangers under any of them to the scheme. If there are, they need to work together to identify and put in place pragmatic mitigating measures.”