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Pension deficits rise for third straight month to £75 billion


The rise comes despite a strong month for asset values and robust company contributions

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Pension deficits among the FTSE 350 rose again for the third straight month, reaching £75 billion at the end of July despite a strong month for asset values, new research showed on Monday.

Deficits of defined benefit pension schemes were £75 billion at 31 July 2012, corresponding to a funding ratio of assets over liabilities of 87 percent. A rise from £70 billion at the end of June, equivalent to a funding level of 88 percent, according to Mercer’s pensions risk survey.

Company contributions to fund these deficits are making little impact, Mercer said. Companies contributed between roughly £1 billion and £2 billion per month towards pension scheme deficits.

“Relatively small changes in investment markets have a very material impact on the financial position of UK pension schemes, more so than the deficit contributions that are being made by companies,” said Adrian Hartshorn, partner in Mercer’s financial strategy group.

Asset values also increased marginally from £501 billion at 30 June to £510 billion the end of July 2012, so that the net increase in the deficit was only £5 billion.

Mercer’s data relates only to about 50 percent of all UK pension scheme liabilities.

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Pension deficits rise for third straight month to £75 billion
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