Defined BenefitAug 9 2017

Defined benefit pension deficit falls to £180.1bn

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Defined benefit pension deficit falls to £180.1bn

The aggregate deficit of the 5,794 defined benefit schemes in the Pension Protection Fund (PPF) 7800 Index has decreased to £180.1bn at the end of July 2017.

The size of the shortfall was down from a deficit of £186.2bn at the end of June 2017. 

The funding ratio improved from 89.1 per cent at end of June 2017 to 89.4 per cent. 

Total assets were £1,524.7bn and total liabilities were £1,704.8bn.

There were 4,156 schemes in deficit and 1,638 schemes in surplus.

JLT Employee Benefits' figures reflect a similar picture.

Its monthly index, using the standard accounting measure (IAS19) used in company reports and accounts, showed the total assets of all private sector defined benefit schemes was £1.6trn with liabilities of £1.8trn and a deficit of £183bn.

Despite this improvement, many defined benefit schemes are showing record deficits, with the Universities Superannuation Scheme having the largest pensions deficit of any UK pension fund at £17.5bn.

Charles Cowling, director of JLT Employee Benefits, said markets continue to hold up despite a challenging political backdrop, meaning pension deficits recorded in a company’s accounts have continued to drift lower.

“However these figures hide some pretty major problems," he said.

"In recent days we have seen both Barclays and the massive USS pension scheme for university staff announce significantly increased funding deficits in their DB schemes.

Responding to concerns over the financial security of some defined benefit schemes with large deficits, Malcolm Mclean, senior consultant at Barnett Waddingham, said: "The general feeling in the pensions industry is there is no defined bemefit crisis and there is always the lifeboat of the Pension Protection Fund."

The Pension Protection Fund recently reported a healthy financial position in its the annual report with invested assets up from £23.4bn to £28.7bn with fewer than expected claims in what has been an eventful year for pensions, which included the collapse of retail store BHS pension scheme and a green paper on the future of defined benefit pensions.

Meanwhile, tens of thousands of savers are continuing to encash their DB schemes with one administrator, JLT Employee Benefits processing £750,000 of transfer payments each working hour and, paying out £100m of transfers each month.