The aggregate accounting deficit of FTSE 350 companies’ defined benefit (DB) pension schemes increased by £1bn over September to £88bn, according to Mercer’s latest Pensions Risk Survey.

The rise was driven by a £40bn fall in asset values over the month, from £847bn at the end of August to £807bn at the end of September.

However, this was mostly offset by a £39bn fall in liabilities during the same period, from £934bn to £895bn.

The decline in liabilities was driven by a rise in corporate bond yields, offset by a rise in market expectations for future inflation, according to Mercer.

Mercer described September as a volatile month for FTSE 350 DB schemes, as the deficit varied from £82bn to £103bn during the month.

“This month’s FTSE 350 numbers reinforce the variability still inherent in scheme funding positions,” said Mercer UK wealth trustee leader, Tess Page.

“A choppy month for funding levels which highlighted that schemes with the right governance processes have to lock in funding gains when they can, by taking risk off the table.

“In a timely update, our European Asset Allocation Insights highlighted how most schemes are still looking to de-risk, with 44 per cent aiming for self-sufficiency 34 per cent targeting buyout with an insurer.

"The research also demonstrated how DB plans are looking to de-risk gradually from growth assets into liability-matching assets and to increase hedge ratios opportunistically.”

Mercer’s Pensions Risk Survey data relates to about 50 per cent 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.

Share Story: