FTSE 350 pension deficits hit £94bn as bond yields fall

The accounting deficit of the defined benefit (DB) pension schemes and other post-retirement benefit plans for the UK’s 350 largest listed companies rose by £6 billion over the course of October to £94 billion, according to Mercer’s Pensions Risk Survey.

“The increase was driven by a £36bn increase in liabilities from £895bn at 30 September 2021 to £931bn at the end of October caused by a fall in corporate bond yields,” said Mercer.

“Asset values increased to £837bn compared to £807bn at the end of September.

“Over the month the deficit varied from £93bn to £118bn.”

Tess Page, UK Wealth Trustee Leader at Mercer, said: “Our recent survey with the CBI highlighted that employers continue to feel weighed down by the cost of managing DB pension schemes.

“This month’s data reinforces the challenges still faced by many schemes despite positive momentum on the asset side.

“Inflation remains above the Bank of England target, and implied future inflation is also elevated.

“In a week when focus is rightly on climate change, this is a timely reminder that interest rates and inflation remain top of the risk list for many pension schemes.

“Along with planning their climate change risk strategy, Trustees should consider reviewing their approach to hedging assets and liabilities to ensure their strategy remains optimal.”

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