A third of the UK’s largest 200 pension schemes remain in surplus despite recent market falls.
This includes 40% of FTSE 100 companies. Within this, over a quarter of the largest 200 UK pension funds are within 5% of the suplus/deficit divide, whereas nearly one third of FTSE 100 companies are in a similar position, according to Aon Consulting’s Monthly FRS167/IAS19 Tracker.
The aggregate pension scheme deficit for the largest 200 UK pension funds increased to a deficit of £13bn at the end of July after spending most of the last two months in surplus. The main fall was caused by market crashes on 26 July, which increased the deficit by £9bn in one day alone, the second largest increase in one day since records began in June 2001.
Although the aggregate deficit for the largest 200 UK pension funds is £13bn, the total deficit before offsetting surpluses is £24bn. Increasingly, pension scheme strategies taken up by companies in the UK are divided between companies with £9bn of pension scheme surplus and those with £24bn of deficit. This is causing a divergence between those schemes targeting deficit recovery and those trying to protect the existing surplus.
Marcus Hurd, senior consultant and actuary at Aon Consulting, said: “Many companies and trustees are seeking to protect their surpluses with innovative solutions such as liability-driven investment, whereas others are seeking to eliminate deficits by a combination of investment strategy and company contributions.”