Deficits back near record high for UK schemes

Tax calculationThe accounting deficit in defined benefit (DB) pension schemes for the UK’s largest 350 companies increased over March after a period of higher bond yields in February came to an end.

Volatility is blamed for the shifting fortunes.

The March accounting deficit rose from £116 billion (€158 billion) at February 27, to £127 billion at March 31, according to Mercer’s Pensions Risk Survey data.

A fall in corporate bond yields and equity markets increased liability values, meaning the funding level for the schemes fell slightly from 84% to 83%.

At the end of March, asset values were £629 billion, up £7 billion compared to February 27, and liability values were £756 billion, up £18 billion over the same period.

“Bond yields fell back again in March reversing some of the rise in yields seen during February which had provided what seems like a rare period of good news at that time,” says Ali Tayyebi, senior partner in Mercer’s retirement business.

“This means deficits have increased to near their record high, and the timing will be particularly unwelcome for those companies with accounting periods ending on 31 March.”

Mercers says the situation results from significant volatility in the market, and there is “little indication that this volatility will diminish any time soon”.

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