FTSE 350 pension scheme deficits fall in April

The FTSE 350 pension scheme deficits fell in April as the UK started to emerge from its national lockdown, the latest Pensions Risk Survey from Mercer has revealed.

Mercer’s data showed that the accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies was £76bn at the end of April, an improvement from £80bn at the end of March.

Figures indicated the improvement was driven by a £16bn increase in asset values, which sat at £799bn compared to £783bn at the end of March.

Liability values also increased from £863bn at the end of March to £875bn at the end of April, which Mercer suggested was driven by a fall in corporate bond yields offset by a small fall in inflation expectations.

Mercer’s Pensions Risk Survey data relates to about 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.

“April saw further gains in growth asset prices, with the spring optimism observed last month continuing despite the nip in the air,” commented Mercer partner and trustee leader, Tess Page.

“Economic data continues to look robust, with a recovery in services on the back of vaccination efforts and the gradual lifting of social distancing measures.

“With pension scheme funding levels stable, many trustee boards and sponsors are focusing on long-term strategy and risk management, particularly with the recent announcements from The Pensions Regulator on the proposed new code of practice and requirements for schemes to conduct an ‘Own Risk Assessment’.

“Though still in review, the code of conduct is set to be a crucial tool to support modern scheme governance, adding value for members, trustees and their sponsors.”

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