FTSE 350 pension deficits increase by £50bn during August

Oliver Gill
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UK Faces Pension Crisis
Mercer reported on the deficits of the UK's largest 350 companies (Source: Getty)

Lower for longer interest rates led to pensions deficits ballooning to new highs at the end of August according to data released today.

The aggregate pension deficits FTSE 350 companies now stand at £189bn, up from £139bn at the end of July.

"The seemingly relentless march in pension scheme deficit increases continues," said Le Roy van Zyl of pension specialists Mercer who compiled the information.

Read more: Furniture and bathrooms: PwC says pension holes need active management

Pension scheme assets rose by £20bn during the month as markets recovered lost ground earlier in the year.

But the rate at which yields fell – which effectively increase the calculation of the valuation of liabilities of a scheme – outstripped the asset rises, thereby further widening in the gap.

Pension liabilities for the FTSE 350 now were £926bn at the end of August with asset values at £737bn.

International Accounting Standards (IAS) deficits and funding (Source: Mercer Pension Risk Survey)

"Depending on the specific situation of the pension scheme and its sponsor, these numbers will have to be dealt with. The first key question to address is how much deficit contributions the sponsor should be paying," said van Zyl.

He added that the second consideration was the level of risk that the schemes should invest in to try and match the rising liabilities.

"There are few easy answers here, apart from the obvious one that any action, including ‘no action’, should be carefully considered amongst the key stakeholders. Letting things drift can be just as dangerous as taking knee-jerk actions,” he said.

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