Mercer’s Pensions Risk Survey data shows that the accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies increased by £5bn, from £52bn in April to £57bn in May.
Liability values increased in May by £11bn to £856bn due to a 0.14% decline in corporate bond yields during the period. This was partially offset by a 0.08% decline in market implied inflation since April. Asset values increased by £6bn, from £793bn to £799bn.
Maria Johannessen, Partner at Mercer, said: “The FTSE350 pension deficit continues to hover around the mid-£50 billion range with no significant change over the past three months. We saw a more positive trend with regards to inflation which declined by 0.08% in May, but the effect of this was mitigated by a 0.14% fall in corporate bond yields.”
Charles Cowling, Actuary at Mercer, added: “Recent political developments in the UK and global economic uncertainty means that scheme trustees and sponsors must prioritise risk management. With Brexit uncertainty reaching a new high following Theresa May’s resignation, we expect volatility to persist for the foreseeable future.”
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 May 2019, changes to the FTSE350 constituents, and newly released financial disclosures, the estimated aggregate assets were £799 billion, compared with the estimated value of the aggregate liabilities of £856 billion.
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