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“Resilient” bond yields help UK schemes reduce deficits

RetirementThe pension funds of UK FTSE 350 companies managed to reduce their deficits by £1 billion in February despite market volatility.

Mercer, the pension scheme consultancy, said “resilient” corporate bond yields helped the companies, though yields were offset by a decline in asset values.

The FTSE 350 pension gap for defined benefit schemes reduced to £72 billion and, combined with January’s fall of £3 billion, 2018 has already matched half the decline achieved in 2017.

The largest listed companies reduced pension liabilities by £7 billion.

Le Roy van Zyl, a Mercer partner and strategy adviser, said: “While this is more welcome news for UK pension schemes, many are alive to the risks they face through continued economic uncertainty.

“More recently, schemes have been seeking certain strategies that allow them to retain some upside potential, such as with equity prices, whilst protecting themselves from the most adverse outcomes.”

While this approach foregoes some of the gains they might otherwise achieve, van Zyl said it ensured schemes were well placed to “weather a hard storm”.

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