Wednesday 1 June 2016 3:31 pm

Defined benefit pension scheme deficits break £300bn mark, as uncertainty surrounding a potential Brexit grows

The level of funding across defined benefit (DB) schemes has worsened over the last year, figures out today show.

According to the analysis by JLT Employee Benefits, the total deficit across all private sector DB schemes has increased to £310bn at end of last month, up from £255bn the same time the year before. 

"Pension scheme deficits have reached record levels, with the total deficit for all UK private sector pension schemes exceeding the £300bn mark for the first time in May," said Charles Cowling, director at JLT Employee Benefits. "Conditions are getting ever more challenging for pension schemes with prolonged low interest rates and uncertainty in the markets ahead of the EU referendum."

The black hole in FTSE 100 companies' plans was looking particularly dark, with the total DB scheme deficit growing to £100bn, up from £80bn at the end of May 2015.

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Meanwhile, the funding level across all of the UK's DB schemes slumped from 83 per cent last year to 80 per cent this year, while funding levels for FTSE 100 companies dropped from 87 per cent to 85 per cent.

DB pension schemes at 31 May 2016

 AssetsLiabilitiesDeficitFunding Level
FTSE 100 Companies£552bn£652bn£100bn85%
FTSE 350 Companies£624bn£738bn£114bn85%
All UK Private Sector£1,263bn£1,573bn£310bn80%

DB pension schemes at 31 May 2015


AssetsLiabilitiesDeficitFunding Level
FTSE 100 Companies£558bn£638bn£80bn87%
FTSE 350 Companies£631bn£723bn£92bn87%
All UK Private Sector£1,283bn£1,538bn£255bn


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Cowling continued: "There isn't too much prospect of imminent relief from markets either, as the nervousness surrounding the EU referendum is causing short-term volatility. With interest rates looking to stay low for some time yet, it seems unlikely that pension schemes will benefit from either an exit or a remain vote.

"While companies should look to continue to seek opportunities to reduce risk and settle pension liabilities, they may wish to wait until after 23 June when there may be greater clarity on the shorter term outlook for markets."

DB pension schemes have been shoved into the spotlight recently, with the black hole in BHS' fund worth £571m sparking a parliamentary inquiry into the Pensions Regulator and the Pension Protection Fund. 

Meanwhile, emergency measures could be on the cards to shave liabilities from British Steel's £15bn pension scheme to make Tata Steel more attractive to buyers.