The FINANCIAL — 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 from £71bn at the end of July to £83bn on 31 August 2017.
At 31 August 2017, liability values increased by £27bn to £855bn compared to £828bn at the end of July. Asset values were £772bn (an increase of £15bn compared to the corresponding figure of £757bn at the end of July 2017).
Le Roy van Zyl, a strategic advisor and Partner at Mercer, added: “Unfortunately the run of good news ended over August with the deficits increasing again materially, albeit still far off the painful numbers we saw a year ago in the aftermath of the EU referendum.”
With the Brexit negotiations now underway in earnest, there is considerable scope for people’s expectations to be frustrated, and the setback above may well be partly due to the general uncertainty. Pension scheme trustees and sponsors will need to be prepared for the fluctuating circumstances, not only in terms of scheme finances and risk, but also around the challenges of making effective decisions against this uncertain backdrop. A range of outcomes are possible and it is key that schemes work through some scenarios to establish whether there are material dangers under any of them to the scheme. If there are, they need to work together to identify and put in place pragmatic mitigating measures”.
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, according to Mercer.