FTSE 350 pension deficit hits £119bn after Brexit vote


The accounting deficit for defined benefit (DB) pension schemes for the UK’s 350 largest listed organisations rose to £119 billion at the end of June 2016, according to research by Mercer.

Its Pensions risk survey found that the accounting deficit for DB pension schemes increased by £21 billion from £98 billion on 31 May 2016 to £119 billion at the end of June following the EU referendum result.

Pension liability values increased by £52 billion from £761 billion at the end of May to £813 billion at the end of June.

As of 30 June 2016, asset values were £694 billion, compared to £663 billion as of the 31 May 2016.

Le Roy van Zyl, senior consultant, financial strategy group at Mercer, said: “Brexit may be positive for some schemes, for example, where the business outlook of the sponsor has improved significantly due to better export prospects. For others, their ability to continue to underwrite pension deficits and risk taking may have deteriorated significantly.

“Clearly, trustees and sponsors should be assessing the new state of affairs to determine if new priorities are needed or any action taken. Uncertainty may be here for some time.”

Ali Tayyebi, senior partner, retirement, at Mercer, added: “The level of market volatility in the last week of June is just an early skirmish in the fight to understand the longer-term outlook for the UK’s economy and markets.

“More than ever, the risks and associated opportunities which this creates and the appropriate speed of response will be very specific to the circumstances of individual pension schemes, highlighting the value of frequent monitoring of funding levels and, for some clients, delegated investment management.”