FTSE 350 pension deficit up 28% in 2018


08 Jan, 2019

FTSE 350 pension deficit up 28% in 2018
The FTSE 350 Defined Benefit pension deficit increased by 28% in 2018, data from Mercer has revealed.

In total the pensions ‘black hole’ has jumped from £32bn to £41bn.

The firm’s 2018 Pensions Risk Survey said that the hike was fuelled by falling asset prices and anticipated Guaranteed Minimum Pension equalisation costs.

Mercer found that asset values fell by £19bn, from £766bn to £747bn, while liabilities fell by £10bn, from £798bn to £788bn, from the end of 2017 to the end of 2018.

Additionally, the quoted funding level dropped 1% to 95% for the full year.

Of the research, Mercer partner, Le Roy van Zyl, said: “2018 was a turbulent year and it is disappointing to see it finish in deficit after finally reaching a surplus for the first time since Mercer began regularly monitoring the position. 

“While the return to deficit is unwelcome, we are still in a markedly better position compared to the very large deficit following the 2016 Brexit vote. 

“However, the significant volatility demonstrates the importance of schemes locking in gains when opportunities to take risk off the table arise.”

Mercer partner, Andrew Ward, added: “2018 was a record year for premiums paid to insurers for buy-ins and buyouts, with more than £20bn of DB obligations being insured. 

“We forecast nearly one third of a trillion pounds to be paid by UK private sector DB pension schemes over a three-year period, from 2019-2021. 

“While the direction of travel is clear, it is important schemes consider how prepared they are for any market shock. 

“With continued Brexit related uncertainty, trustees must ensure the risks they’re running are consistent with their objectives and protects their sponsors’ long-term financial security.”