Pensions - Articles - FTSE 350 pension deficit finishes 2019 back where it started

 Charles Cowling, Partner at Mercer, said: “2019 was a challenging and volatile year in politics and markets, but ended on a positive note with markets rallying, as uncertainty over Brexit settled somewhat. 

 “Although the general election result gives some clarity for markets, there is no denying the general weakness in the UK (and global) economy which means cuts in interest rates are likely. The Bank of England’s Monetary Policy Committee recently voted to hold interest rates at 0.75% but suggested rates may need to be cut if the global economic growth stalls or Brexit uncertainties persist. Inflation is expected to dip down to 1.25% in early 2020, which is positive news for pension schemes, though longevity may be on the increase again after a stalling in recent years.

 Mr Cowling added: “2019 was a record year for the settlement of pension liabilities, with the final figures for buy-out deals likely to break through £40bn – smashing the previous record of £24bn in 2018. 2020 could be the year trustees finally manage to largely eliminate interest rate and inflation risks, and reduce longevity and equity market risks down to manageable levels.”

 Mercer’s Pensions Risk Survey data relates to about 50% of all UK pension scheme liabilities and analyses pension deficits calculated using the approach companies have to adopt for their corporate accounts. The data underlying the survey is refreshed as companies report their year-end accounts. Other measures are also relevant for trustees and employers considering their risk exposure. But data published by the Pensions Regulator and elsewhere tells a similar story.