The stubbornly high deficits of UK companies defined benefit pension schemes remained unchanged over the month of November, Mercer said today.
The findings came from the consultancy's latest risk survey, which said pension schemes of FSTE 350 companies had an estimated deficit of £102bn at the end of last month. Mercer's figures use the IAS19 accounting measure and relate to around 50% of all UK pension scheme liabilities.
Asset values fell by £3bn over the month to £563bn. However, liabilities also fell by £3bn over the period to £665bn at the end of November.
Ali Tayyebi, Mercer's head of DB risk in the UK, said the fall in corporate bond yields, which had been largely responsible for the increase in deficits during October, was reversed during November.
'However, this did not lead to a material fall in the value of liabilities because the market's expectation for long-term inflation increased. This was despite the November inflation report from the Bank of England saying that the outlook for near-term inflation was less than 3 months ago,' said Tayyebi.
'This means that yet again circumstances have conspired to keep accounting deficits stubbornly high as companies approach 31 December year-ends.'
Adrian Hartshorn, senior partner in Mercer's financial strategy group, noted that scheme deficits have remained high since the credit crisis, despite sponsors paying substantial contributions into UK pension schemes over the period.
'Pension scheme risks can be complex and the absence of a clear set of beliefs or objectives for managing these risks can result in detrimental financial outcomes for scheme sponsors,' he said.
