Defined Benefit  

Pension deficits drop 85% in April

Pension deficits drop 85% in April

The aggregate deficit of the 5,450 defined benefit pension schemes in the Pension Protection Fund 7800 Index fell by £37.5bn in April.

This meant the shortfall decreased from 43.9bn in March to £6.4bn at the end of the following month, largely due to a good performance in equity markets.

Meanwhile the funding ratio improved from 97.4 per cent at the end of March to 99.6 per cent in April.

At the end of April, the total assets in DB schemes were £1.65trn, while total liabilities were £1.66trn.

There were 3,089 schemes in deficit and 2,361 schemes in surplus, the PPF stated.

According to Andy Tunningley, head of UK strategic clients at BlackRock, said: "Growth assets were helped by equity markets continuing to push higher, largely driven by a positive start to the Q1 earnings season and the continuation of muted geopolitics throughout the month.

"Rising gilt yields meant liabilities fell, although yields remain below their end February levels.

"So despite liabilities rising £50bn over the first four months of the year, the strong start to the year from risk assets (with most schemes seeing 10 plus per cent returns) means UK pension scheme funding levels are 1.6 per cent higher than where they ended 2018, with aggregate deficits down £25bn."

Other DB scheme indices also showed decreasing shortfalls.

The PwC Skyval Index – which provides an aggregate health check of the UK’s 5,450 corporate DB pension funds, based on the 'gilts plus' method widely used by scheme actuaries – showed a drop of £80bn in these schemes' deficits, to £180bn at the end of April.

Steven Dicker, PwC’s chief actuary, said: "The upward trend in equities and pick up in bond yields contributed to a reduction in the deficit.

"In addition, the annual update to the assumed future mortality improvement tables also reduced the deficit, due to a slowing down of life expectancy improvements."

maria.espadinha@ft.com

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