Defined Benefit  

FTSE 350 pension deficits reduced by £8bn

FTSE 350 pension deficits reduced by £8bn

The deficit of defined benefit (DB) pension schemes of the UK's 350 largest listed companies has fallen £8bn, or 9 per cent, during 2017, according to data from Mercer.

According to the consultant FTSE 350 defined benefit pension deficits stood at £76bn at the end of 2017, falling from £84bn in the previous year.

But the schemes liabilities increased by £36bn to £857bn, when compared to £821bn at the end of 2016.

Asset values stood at £781bn at the end of the year, a hike of £44bn.

According to Alan Baker, partner and chair of the defined benefit policy group at Mercer, the pension deficit decrease is "a welcome reversal of the trend in recent years that saw the deficit more than double in 2016 alone".

He said: "Trustees who run schemes, however, need to continue to be prudent and ask themselves how much risk they need to take to meet their funding requirements."

Despite the decrease in the deficits, the levels of risk being taken by schemes "are still significant, and the positive outcome we have seen for 2017 is very closely linked to stock market performance," argued Andrew Ward, partner and head of risk transfer consulting at Mercer.

He said: "As we move into 2018, it is important for individual schemes to consider how prepared they are for any market shock.

"With Brexit-related uncertainty trustees need to consider the potential impact on their sponsor's financial security. Against this backdrop, we expect schemes to reduce risk and consolidate gains.

"The pace of risk management activity we saw in 2017 is likely to accelerate and we expect 2018 to be the biggest year ever for pension risk transfer."

JLT Employee Benefits also published its figures on scheme deficits this week.

According to the firm, this gap increased £1m in the last month, standing at £52bn at the end of December.

maria.espadinha@ft.com