The accounting position of defined benefits pension schemes listed on the FTSE 350 improved by £19bn in November, down from £36bn at the end of the previous month.
The reduced deficit in November goes some way to reversing the £39bn fall from a £3bn surplus in September. October’s £36bn deficit was the largest deficit in a year.
Liabilities also fell over the period to the end of November, from £795bn to £767bn, findings from Mercer’s Pension Risk Survey showed. This was put down to an increase in corporate bond yields, and a fall in market-impaired inflation.
Quoted funding levels of these schemes improved in November, rising from 95 per cent to 98 per cent.
Adrian Hartshorn, senior partner at Mercer, said: "This month’s improvement in the funded status is welcome after the significant impact of the Lloyds High Court judgment in October."
But he cautioned: "There is still a considerable gap to bridge before pension schemes can return to surplus. Trustees should remain prudent, seek to lock in gains and ask themselves how much risk they need to take to meet their funding requirements."
LeRoy van Zyl, defined benefits strategist and partner at Mercer, added: "This is a meaningful reduction in the deficit but, as we approach the end of the year and as the government attempts to get the Brexit Withdrawal Agreement through Parliament, trustees should evaluate the potential impact of political uncertainty on their sponsor’s financial security and put themselves in a position to capitalise on de-risking opportunities as they arise."
Tom Selby, senior analyst at AJ Bell, said: "It’s always difficult to say what any fluctuations mean for the future. The defined benefits sector has concentrated on yields, and certainly trustees will have an eye on interest rates.
"However, I think the key thing is how well providers can reduce their own deficits, and ensure pensioners are paid a fair sum. This is certainly something The Pensions Regulator would like to see."
dan.moore@ft.com
