FTSE 100 pension scheme deficits decrease by a third

Written by Jack Gray
01/10/2018

The latest monthly defined benefit funding indexes have shown that FTSE 100 pension schemes’ deficits have decreased by £1bn to £2bn over the past month, JLT’s latest data revealed.

In JLT Employee Benefit’s monthly index, FTSE 100 schemes’ funding level remained at 100 per cent, while liabilities decreased by £8bn to £670bn and assets fell by £7bn to £668bn, as of 30 September 2018.

This represents a relatively quiet month for defined benefit schemes in the FTSE 100.

Compared to this time last year, the deficit has shrunk from £30bn to £2bn and liabilities have fallen by £29bn from £669bn. However, asset value has fallen by £1bn from £669bn during this period.

JLT Employee Benefits chief actuary, Charles Cowling, commented: “Equity markets have held up well, despite continuing political uncertainty in Europe and the US. All of this means that pension scheme deficit positions are broadly unchanged, showing a modest improvement over the last 12 months.”

The FTSE 350 pension scheme deficit remained unchanged from August 2018 (£7bn), while assets over the same period decreased from £765bn to £756bn, liabilities fell from £771bn to £763bn and the funding level remained at 99 per cent.

In comparison to September 2017, FTSE 350 defined benefit schemes’ deficit dropped by £31bn from £38bn and the funding level increased from 95 per cent.

Furthermore, liabilities fell by £31bn from £794bn while the asset value was unchanged at £756bn.

“Perhaps the news that will be of most interest to finance directors and shareholders is the recent announcement from the Office of National Statistics that life expectancy in the UK has stopped improving for the first time since their figures began in 1982.

After decades of continuing improvements in life expectancy resulting in ever increasing pension liabilities – this slowdown in longevity improvements has the potential to knock billions off pension liabilities. We estimate that 2018 could see pension liabilities reduce by over £40bn on account of the changing outlook for life expectancy, sending pension schemes soaring into surplus – at least as far as the numbers recorded in company accounts are concerned.”

According to JLT’s latest figures, all UK private sector pension schemes deficit totalled £37bn as of 30 September 2018, down by £80bn from this time last year, and the funding level has increased by 5 per cent to 98 per cent. Assets increased from £1,528bn to £1,565bn and liabilities declined from £1,645bn to £1,602bn.

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