The accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed organisations stood at £139 billion at the end of July 2016, compared to £119 billion at the end of June, according to research by Mercer.
Its Pensions risk survey, which is based on analysis and projections of FTSE 350 organisations’ financial statements adjusted from their financial year-end reports, also found that asset values were £717 billion as of 29 July 2016. This is a £23 billion increase on the £694 billion recorded on 30 June 2016.
Pension liabilities have also increased, rising by £43 billion from £813 billion in June 2016 to £856 billion in July 2016. This is the highest figure recorded since Mercer began monitoring deficits on a monthly basis.
Le Roy van Zyl, senior consultant, financial strategy group at Mercer, said: “The vote for Brexit is clearly having a significant impact. Furthermore, the aggregate size of the pension scheme deficits glosses over the fact that some schemes and sponsors will have been much more affected than others, depending on their investment strategy and the nature of the sponsor’s business. In talking to trustees and sponsors over the past month it is clear that the continued uncertainty following the EU referendum makes it a challenging environment to operate a pensions scheme in.
“However, it is recognised that working through scenarios of what might happen is a very useful way of identifying key threats and opportunities. This will enable a revised set of priorities to be adopted, or at least ensure in other cases that ‘no action’ is a deliberate decision. Indeed, some risk management opportunities are now much more attractive than before.
“What has become very clear is that because different schemes have different stress points, careful assessment and planning is needed to ensure the right approach is adopted from here on.”