Defined Benefit  

FTSE 350 pension deficits fall £3bn

FTSE 350 pension deficits fall £3bn

The deficit of defined benefit (DB) pension schemes of the UK's 350 largest listed companies has fallen £3bn in January, according to data from Mercer.

According to the consultant, the pension shortfall of these firms stood at £73bn in the first month of the year, falling from £76bn at the end of December.

The reduction of deficits was driven by rising corporate bond yields, which decreased pension schemes' liabilities, although this was partially offset by an increase in inflation expectations, the firm stated.

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The schemes liabilities fell by £13bn to £844bn, which compares to £857bn at the end of December.

The pension gap narrowed despite assets falling by £10bn to £771bn.

The January figure is equivalent to almost half the decline achieved in the whole of 2017, when pension deficits dropped £8bn.

According to Alan Baker, partner and chair of the DB policy group at Mercer, "this is a really meaningful reduction in the pension gap in just one month and should be considered as positive news for UK businesses".

He said: "However, the fall in asset values was also significant and is an important reminder for individual schemes to consider the level of risk they are running.

"Trustees and sponsors need to understand their ability to cope with future market volatility, including shocks, and ensure they have clear plans and mitigations in place to protect them from any downside."

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

According to the firm, this gap decreased by £8bn, standing at £44bn at the end of January.

maria.espadinha@ft.com