The funding level of all UK private sector defined benefit pension plans reached 94% at the end of February, which is up 1% from the previous month, and 4% from the same time last year, according to JLT Employee Benefits (JLT).
Meanwhile, the funding level of the defined benefit pension plans of the FTSE 100 companies climbed to 97% from 95% at the end of the previous month, and 93% at the end of February 2017. The funding level of the FTSE 350 companies’ DB plans was 96% as of Feb. 28, compared to 95% at Jan. 31, and 92% at the same time last year.
“Once again, markets have been reasonably benign for pension schemes this month and overall reported pension deficits have continued to drift downwards,” said Charles Cowling, director, JLT Employee Benefits, in a release. “However, this positive picture masks ongoing challenges for a number of companies with large pension schemes, evidenced this week by news that the Toys R Us pension scheme will soon be following Carillion’s scheme into the Pension Protection Fund (PPF).”
Cowling said one of the key problems for many companies is that the pension deficit calculated by its trustees is significantly greater than the pension deficit reported in the employer’s accounts.
“Moreover, actuarial valuations currently being conducted are likely to show a need for significant increases in cash funding,” he added. “This will come as a difficult message for both schemes and sponsors, at a time when the tension between funding deficits and paying dividends to shareholders has already spilled over.”
The total deficit of all UK private sector DB plans fell to £105 billion at the end of February, from £124 billion at the end January, and £180 billion at the same period last year. Meanwhile, the aggregate deficit for the DB plans of the FTSE 100 companies dropped to £24 billion from £35 billion a month ago, and was cut by more than half during the past 12 months from £52 billion. The deficit for the FTSE 300 DB plans declined to £32 billion from £44 billion as of Jan. 31, and £63 billion at the end of February 2017.
Although the overall value of total assets fell from last month, and the year-ago period for UK DB plans, they declined at a slower rate than falling liabilities, which allowed their deficits to shrink. Total assets for all UK DB plans dropped to £1.524 trillion from £1.555 trillion at the end of January, and £1.571 trillion at the same time last year. Meanwhile, their liabilities declined to £1.629 trillion from £1.679 trillion a month ago, and £1.751 trillion a year ago.
At Feb. 28, 2018 | Assets | Liabilities | Surplus / (Deficit) | Funding Level |
FTSE 100 Companies | £667 billion | £691 billion | (£24 billion) | 97% |
FTSE 350 Companies | £753 billion | £785 billion | (£32 billion) | 96% |
All UK Private Sector Pensions | £1.524 trillion | £1.629 trillion | (£105 billion) | 94% |
At Jan. 31, 2018 | Assets | Liabilities | Surplus / (Deficit) | Funding Level |
FTSE 100 Companies | £678 billion | £713 billion | (£35 billion) | 95% |
FTSE 350 Companies | £765 billion | £809 billion | (£44 billion) | 95% |
All UK Private Sector Pensions | £1.555 trillion | £1.679 trillion | (£124 billion) | 93% |
At Feb. 28, 2017 | Assets | Liabilities | Surplus / (Deficit) | Funding Level |
FTSE 100 Companies | £673 billion | £725 billion | (£52 billion) | 93% |
FTSE 350 Companies | £760 billion | £823 billion | (£63 billion) | 92% |
All UK Private Sector Pension | £1.571 trillion | £1.751 trillion | (£180 billion) | 90% |
Source: JLT Employee Benefits
Tags: deficit, Defined benefit (db) pension plans, funded level, UK