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The Actuary The magazine of the Institute & Faculty of Actuaries

UK DB pension scheme deficit ‘increases to £172bn’

The combined deficit of the UK’s private sector defined benefit pension schemes has increased from £77bn to £172bn over the past 12 months, according to figures published by JLT Pension Capital Strategies yesterday.


According to the consultancy’s latest monthly DB funding update, schemes’ liabilities on the basis of the IAS19 accounting standard amounted to £1,179bn as of April 30 while their assets totalled £1,007bn. This means the funding level for schemes is now 85%, compared to 12 months earlier when schemes’ funding level was 93%.

Funding levels for the UK’s leading listed companies, the FTSE 100, have fallen in line with this – from 92% at the end of April 2011 to 87% at the end of last month, while the FTSE 350 saw a fall from 92% to 86% over the same period.

Charles Cowling, managing director of JLT Pension Capital Strategies, said that at a time when many schemes’ actuarial valuation was due, its latest figures actually ‘play down’ just how bad the situation facing pension schemes is.

‘We have now had the promised statement from the Pensions Regulator on how it expects trustees to react to current market conditions when negotiating funding agreements or recovery plans on the back of actuarial valuations – and it provides little or no respite for companies with large legacy DB pension schemes,’ he said.

‘With no sign that quantitative easing is about to be reduced and the OECD even encouraging more quantitative easing, the pain this is causing pension schemes (by forcing up liability values) looks set to continue for some time yet.’

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