Mercer’s Pensions Risk Survey data shows that the accounting deficit of defined benefit (DB) pension schemes and other post-retirement benefit plans for the UK’s 350 largest listed companies rose by £2bn over the course of August, standing at £87bn at the end of the month, an increase from £85bn at the end of July.
The increase was driven by a £6bn increase in liabilities to £934bn compared to £928bn at the end of July, caused by a rise in market expectations for future inflation offset by a rise in corporate bond yields. Asset values rose from £843bn at 31 July 2021 to £847bn at the end of August 2021.
Tess Page, UK Wealth Trustee Leader at Mercer, said: “We’ve seen strong economic growth in recent months, but looking ahead the global economy faces challenges – COVID is back on the rise in many regions, and in the UK the winding down of government support may weigh on growth. The last month saw fairly small changes to aggregate funding levels, but the course ahead could well be a choppy one. Schemes with clear integrated risk management strategies will be well-prepared for the future.”
Mercer’s Pensions Risk Survey data relates to about 50% 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. Other measures are also relevant for trustees and employers considering their risk exposure. Data published by the Pensions Regulator and elsewhere tells a similar story.