FTSE 350 DB pension deficit declines by £4bn

The accounting deficit of defined benefit (DB) pension schemes for companies in the FTSE 350 fell by £4bn to £76bn in April 2021, according to Mercer.

As reported by our sister title, Pensions Age, its Pensions Risk Survey revealed that asset values had increased by £16bn during the month to £799bn.

However, this was partially offset by liabilities also rising, from £863bn to £875bn, which Mercer attributed to a fall in corporate bond yields offset by a small decline in inflation expectations.

Mercer partner and trustee leader, Tess Page, warned that the true cost and economic impact of the pandemic is yet to fully play out, and urged pension trustees to consider reducing risk.

“April saw further gains in growth asset prices, with the spring optimism observed last month continuing despite the nip in the air,” she stated.

“Economic data continues to look robust, with a recovery in services on the back of vaccination efforts and the gradual lifting of social distancing measures. 

“With pension scheme funding levels stable, many trustee boards and sponsors are focusing on long-term strategy and risk management, particularly with the recent announcements from The Pensions Regulator on the proposed new code of practice and requirements for schemes to conduct an ‘Own Risk Assessment’.

“Though still in review, the code of conduct is set to be a crucial tool to support modern scheme governance, adding value for members, trustees and their sponsors.”

Mercer’s survey data relates to approximately 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. 

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