DB pension scheme deficit falls by £9bn in June

The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies fell by £9bn over the course of June, according to Mercer’s latest Pensions Risk Survey.

The survey data showed the deficit stood at £72bn at the end of the month, reflecting a fall from £81bn at the end of May.

Mercer suggested this was driven by an £11bn increase in assets to £814bn, compared to £803bn at the end of May. Liability values increased from £884bn at the end of May to £886bn at the end of June, which was driven by a fall in corporate bond yields offset by a small fall in market expectations for future inflation.

Mercer’s Pensions Risk Survey data relates to around 50% of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts.

“Funding levels continue to improve as markets remain favourable, despite the looming threat of inflation and the UK’s challenging emergence from the COVID-19 lockdown,” commented Mercer chief actuary, Charles Cowling.

“This month, inflation hit a two-year high and the Bank of England expects it to rise further. However, the Bank still voted last week to hold interest rates at their current record low levels and their quantitative easing program unchanged.”

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