The deficit of private sector defined benefit pension schemes has almost halved to £78bn as at 30 April 2018, down from £146bn a year ago, JLT Employee Benefits has said.

In the firm’s monthly funding update, FTSE 100 companies pension deficit reduced from £40bn to £15bn, mostly due to a £29bn decrease in liabilities, offset slightly by a £4bn decrease in assets, under the IAS19 accounting standard.

FTSE 350 companies underwent a similar transformation, with the deficit reducing from £50bn to £22bn, due to a £33bn decrease in liabilities and a £5bn decrease in assets.

JLT Employee Benefits director, Charles Cowling, said: “Markets continue to be positive for pension schemes and overall reported pension deficits are showing a strong improvement from twelve months ago.

“Indeed, the FTSE 100 is close to showing an aggregate surplus in its pension schemes for the first time in almost a decade. This is despite the recent poor GDP figures suggesting the UK economy is on the brink of stagflation.”

The funding level of FTSE 100 pension schemes was 98 per cent, compared to 94 per cent a year ago, while FTSE 350 companies funding level increased from 94 per cent to 97 per cent.

Cowling added that the outlook for interests rates will be of paramount importance for pension schemes at the moment, as poor GDP figures may have put back the date of the next interest rate rise.

According to JLT Employee Benefits, the Bank of England is debating whether to introduce greater clarity in its future interest rate plans, helping schemes to plan their de-risking paths.

He added: “One of the key problems for many companies is that the pension deficit calculated by scheme trustees, which determines the cash funding required to be paid by the employer, is significantly greater than the pension deficit reported in the employer’s accounts.

“Now may be a good time for companies and trustees to take advantage of recent positive market conditions and reduce risk in their pension schemes.”

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