The AA’s UK defined benefit pension deficit dropped by £137m over the year, on an IAS 19 accounting basis.

In its full year results, published 17 April, it revealed that the AAUK scheme had a deficit of £188m at 31 January 2018, compared to £325m at 31 January 2017. Scheme assets have increased by £113m from £2190m to £2303m. Liabilities have decreased by £24m from £2515m to £2491m.

“The decrease in the deficit is due to the strong performance of plan assets, falling long-term inflationary expectations, changes in the demographic assumptions (reflecting the latest outlook for mortality rates), the past service credit in respect of the closure of the final salary sections and change to CPI-linked pension indexation for the Care (career average revalued earnings) section within the AAUK scheme and group contributions paid into the schemes. This was partially offset by falling discount rates over the period,” it said.

However, the results of the scheme’s most recent triennial review, which were revealed on 8 June 2017, found a deficit of £366m at 31 March 2016, up from £202m at the last review in 2013. AA said the increase was largely caused by a reduction in the gilt yields.

As part of the triennial review, AA agreed a nine-year recovery plan with the trustee and will make additional contributions of £8m per annum until March 2019, £11m from April 2019 for one year, £11m plus inflation, per annum, from April 2020, and £13m plus inflation, per annum, from April 2022 to June 2026.

These will be incremental to the existing deficit reduction contributions to the UK pension scheme of £13m increasing with inflation through to 2038. The total deficit reduction payment to the UK pension scheme in the 2018 financial year was £19m. The next triennial actuarial review is scheduled as at 31 March 2019.

The company said that it has also moved members who were in the final salary section of the DB scheme to the Care section. Changes were also made to the Care section with the inflation measure for pension indexation moved to CPI from RPI and additional employee contributions of 1.5 per cent of salary and a change to accrual rates.

“This approach has mitigated some of the recent increases in ongoing pension service costs. Overall, the changes have reduced our exposure to pension risks, increased our competitiveness within our industry and provided for a more consistent pension offering across our existing defined benefit scheme members,” the AA said.

As a result of the changes it made a £34m gain, made up of £12m from the closure of the final salary section, and £22m from the change in indexation of the Care section.

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