- FTSE350 pension deficit remains at £41bn
- £18bn increase in liabilities and asset values
- Continued market and political uncertainty underpins importance of de-risking
Mercer has today published its monthly Pensions Risk Survey data, which shows that the accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies remained unchanged at £41bn in January. This follows a significant rise in the deficit in December 2018, which saw the gap widen by £34bn.
Pension scheme liabilities increased by £18bn to £806bn in January due to a fall in corporate bond yields, offset by a fall in market implied inflation. However, asset values also rose by £18bn to £765bn leaving the overall deficit unchanged.
Maria Johannessen, Partner at Mercer, said: “The ship has been steadied in January following significant volatility in December, which was a disappointing end to a year that saw a surplus during the summer for the first time since Mercer began regularly monitoring the position. As market and political uncertainty continue to cause significant volatility, it’s important trustees ensure they are adequately protected from downside risk.”
Le Roy van Zyl, Partner at Mercer, added: “While January saw the accounting deficit of DB pension schemes remain steady, there is still a significant gap to fill. Brexit uncertainty is of course still high, and this is likely to cause material funding level volatility until it is resolved, depending on pension schemes’ exposure to UK financial factors. There are also material emerging global events that add to this volatility. Trustees must reflect on their risk appetite against this backdrop, given the strength of support from their sponsor, and ensure the risk they’re running is consistent with their scheme objectives.”
Mercer’s data relates to about 50% of all UK pension scheme liabilities and analyses pension deficits calculated using the approach companies have to adopt for their corporate accounts. The data underlying the survey is refreshed as companies report their year-end accounts. Other measures are also relevant for trustees and employers considering their risk exposure. But data published by the Pensions Regulator and elsewhere tells a similar story.
Notes to Editors
Mercer estimates the aggregate combined funded ratio of plans operated by FTSE350 companies on a monthly basis. This is based on projections of their reported financial statements adjusted from each company’s financial year end in line with financial indices. This includes UK domestic funded and unfunded plans and all non-domestic plans. The estimated aggregate value of pension plan assets of the FTSE350 companies at 31 December 2018 was £747 billion, compared with estimated aggregate liabilities of £788 billion. Allowing for changes in financial markets through to 31 January 2019, changes to the FTSE350 constituents, and newly released financial disclosures, the estimated aggregate assets were £765 billion, compared with the estimated value of the aggregate liabilities of £806 billion
Mercer delivers advice and technology-driven solutions that help organisations meet the health, wealth and career needs of a changing workforce. Mercer’s more than 23,000 employees are based in 44 countries and the firm operates in over 130 countries. Mercer is a wholly owned subsidiary of Marsh & McLennan Companies (NYSE: MMC), the leading global professional services firm in the areas of risk, strategy and people. With nearly 65,000 colleagues and annual revenue over $14 billion, through its market-leading companies including Marsh, Guy Carpenter and Oliver Wyman, Marsh & McLennan helps clients navigate an increasingly dynamic and complex environment. For more information, visit www.mercer.com. Follow Mercer on Twitter @Mercer. In the UK, Mercer Limited is authorised and regulated by the Financial Conduct Authority.
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