DB pension scheme deficits for all UK private sector companies increased by £8bn between 2012 and 2013, yet the overall funding position improved marginally, from 88% to 89%, as a result of the value of both assets and liabilities increasing, finds JLT Pension Capital Strategies (PCS) monthly index.

According to the index, DB pension scheme deficits for all UK private sector companies stood at £135bn as of 31 March 2012 and rose to £143bn at 31 March 2013. However the value of assets rose from £1,037bn to £1,164bn and liabilities increased from £1,172bn to £1,307bn over this period.

FTSE 100 companies saw deficits rise by £7bn, as the value of assets rose from £433bn to £481bn and the value of liabilities rose from £505bn to £560bn, increasing the funding deficit from £72bn to £79bn.

The assets of FTSE 350 companies at 31 March 2013 were valued at £545bn, with liabilities at £631bn, creating a deficit of £86bn. This compares to assets of £499bn and liabilities of £583bn, with a deficit of £84bn, last year.

Funding levels for both FTSE 100 and FTSE 350 companies remained at 86% between 31 March 2012 and 31 March 2013.

Explaining the increases, JLT PCS managing director Charles Cowling said: “Last week’s Budget included an order to the Bank of England to consider using unconventional monetary tools to boost the economy. This is expected to keep bond rates low and so maintain high pension liabilities. However if the economy is boosted then equity asset values should increase and thus help to reduce pension scheme deficits. The Cyprus crisis is also acting to keep bond rates low. Prior to this crisis the eurozone looked as though it was stabilising, and so UK bond rates were starting to rise, but this Cypriot effect could make UK bonds comparatively that bit more attractive.

“So overall we are expecting UK bond yields to remain low keeping scheme liabilities high, but there is the prospect of better future asset returns to continue helping improve funding levels.”

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