Higher-than-expected inflation hits UK pension funds

Pensioner with caneThe slightly higher market outlook for inflation added about £5 billion (€6.3 billion) to FTSE 350 pension fund deficits, according to Mercer’s Pension Risk Survey data.

This increase was only partially offset by increases in pension fund asset values. At the end of August, FTSE 350 pension scheme accounting deficits stood at £63 billion, a funding ratio of assets over liabilities of 89%. 

“Over the month, the yield on high quality corporate bonds remained virtually unchanged but the market’s expectation for long-term inflation increased marginally,” the consultancy said in a statement.

The net effect was an increase in liabilities of about 1% over the month to £576 billion. Meanwhile, asset values increased from £510 billion to £513bn to offset the increase in liabilities to some extent.

©2012 fund europe

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