UK defined benefit pension scheme deficit worse than a year ago, finds JLT Employee Benefits
The deficit for all private sector defined benefit pension schemes in the UK was an estimated £228bn at the end of October, according to figures from JLT Employee Benefits released today.
By comparison, the deficit at the end of October 2014 was £208bn.
JLT Employee Benefits estimates that total defined benefit pension liabilities for the private sector now stand at £1,454bn, compared to assets of £1,226bn. A year ago, liabilities were £1,402bn, compared to assets of £1,194bn.
Listed companies are also failing to improve their pension position. JLT Employee Benefits estimated that the deficit for defined benefit pension schemes was £69bn, compared to £68bn a year ago, for FTSE 100 companies and £80bn, compared to £79bn a year ago, for FTSE 350 companies.
Charles Cowling, director, JLT Employee Benefits, said: “Huge efforts have been made by pension schemes and their sponsoring companies to shore up deficits but they remain stubbornly high. Even as the UK’s largest private sector pension schemes, such as Tesco's, are closing, billions of additional funding have been poured into those funds and huge amounts of time and money have been spent trying to improve the matching of pension assets to liabilities through liability-driven investment strategies and longevity swaps.
“Yet even with the relief of reasonable investment returns and the latest announcements on longevity showing that there has been a slowing down in the pace of mortality improvement, deficits are almost unchanged from a year ago.”
Just last week, JLT Employee Benefits revealed that aggregate pension liabilities could increase by as much as £62bn if an interest rate rise fails to occur for one year after market expectations.
“This shows that companies and pension schemes need to do even more, through liability-driven investment strategies and the like, to protect themselves against the lottery of interest rate risks,” said Cowling.