Defined benefit pension funding deficit falls to £200bn as of April 2018

Pension

The funding deficit for defined benefit (DB) pension schemes in the UK has fallen to £200 billion at the end of April 2018, according to research by PricewaterhouseCoopers (PWC).

Its Skyval Index, which is based on data relating to 5,800 DB pension funds and collected through the Skyval pensions platform used by trustees, sponsors and advisors, found that the funding deficit for UK DB pension schemes has decreased by £250 billion between November 2017 and April 2018.

At the end of April 2018, pension assets were £1,560 billion according to the current funding measure, which is used by pension fund trustees to determine organisations’ cash contributions.

The current funding measure liability target at the end of April 2018 was £1,760 billion, compared to £2,010 billion at the end of November 2017.

Steven Dicker, chief actuary at PWC, said: “The funding position has improved considerably over recent months, meaning the deficit has fallen from £450 billion in November 2017 to £200 billion now.

“This is due to three key factors: adoption of the latest UK pension fund, increases in long-term real interest rates and allowance for revised mortality projections based on our 2017 survey of assumptions adopted by pension scheme trustees, which reflect the continued slowdown in the rate of increase in life expectancy.

“However, the funding level is likely to remain volatile throughout 2018 as Brexit negotiations and economic uncertainty continue.”