Defined benefit pension deficit rises by £40bn

Defined benefit pension deficit rises by £40bn

The aggregate deficit of the around 4,200 defined benefit schemes in the Pension Protection Fund (PPF) 7800 Index has increased to just over £220bn.

This represents an increase of £40.3bn at the end of August, compared to the previous month’s figures of £180.1bn.

The funding ratio decreased from 89.4 per cent at end of July 2017 to 87.6 per cent.

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DB schemes’ total assets were £1.5trn, while total liabilities were £1.7trn.

There were 4,261 schemes in deficit and 1,533 schemes in surplus, the PPF said.

These figures are in line with PwC’s figures, announced in the beginning of the month, which showed an increase of £40bn in deficits.

PWC’s Skyval index, which comprises data from 5,800 UK DB schemes, showed pension fund assets at almost £1.6trn and liabilities of just over £2trn.

Only considering UK’s 350 largest listed companies, the deficit increased by £10bn in August to hit £83bn, according to Mercer figures.

But Nathan Long, senior pension analyst at Hargreaves Lansdown, said that “a large pinch of salt should be mandatory for anyone reading” this data.But 

He said: “The cost of providing guaranteed income increased during the month and so pushed up pension scheme liabilities with it.”

Similar figures should be expected in the coming year, “as the state of play with Brexit and the potential for interest rate rises will undoubtedly influence gilt yields,” he added.

“Above all, short term market movements should not be allowed to dictate long term government policy,” he concluded.