Pensions - Articles - FTSE350 pension deficits increase

Mercer’s Pensions Risk Survey data shows that the accounting deficit of defined benefit (DB) pension schemes and other post-retirement benefit plans for the UK’s 350 largest listed companies rose by £10bn over the course of November, standing at £104bn at the end of the month, an increase from £94bn at the end of October.

 The increase was driven by a £31bn increase in liabilities from £931bn at 29 October 2021 to £962bn at the end of November caused by a fall in corporate bond yields and an increase in market expectations of inflation. Asset values increased to £858bn compared to £837bn at the end of October.

 Tess Page, UK Wealth Trustee Leader at Mercer, said: “The impact on markets of the new Omicron variant served to highlight that the pandemic is not yet over. Alongside this fresh uncertainty, inflation remains a hot topic with significant increases observed and potentially more to come. Whilst some inflation drivers such as supply chain issues and reopening price pressures are arguably “temporary”, others may be longer term. As a pandemic-fatigued nation heads towards the Christmas break, this was a month in which unhedged assets again failed to keep pace with liabilities – risk management should be high on the agenda for all schemes in 2022”

 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. 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. Data published by the Pensions Regulator and elsewhere tells a similar story.

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