UK private sector pension deficit down £37bn in last 12 months – JLT

Written by Talya Misiri
02/01/18

The deficit of all UK private sector pension schemes fell by £37bn in the 12 months to 31 December 2017, JLT Employee Benefits has reported.

According to JLT’s monthly index, the pension deficit of all UK private sector schemes under the standard accounting measure (IAS 19) fell from £187bn at 31 December 2016 to £150bn at the end of 2017. These schemes ended the year with £1,624bn in assets and £1,773bn in liabilities.

FTSE 100 schemes and FTSE 350 schemes also saw reduced deficits. FTSE 100 deficits fell from £55bn to £41bn year-on-year and FTSE 350 scheme deficits dropped from £68bn to £52bn in the same period.

FTSE 100 schemes had assets of £688bn and liabilities of £729bn at the end of December 2017 and FTSE 350 firms also reported assets of £777bn and £829bn of liabilities.

JLT Employee Benefits director Charles Cowling commented: “2017 was a turbulent year for pension schemes but one with many positives. Markets were strong in the face of considerable political uncertainty and we have, finally, signs that interest rates are on the way up. Additionally, the latest mortality analysis points to a slowing down in the rate of increasing longevity. All of this is good news for pension scheme deficits which have shown some significant improvement over the past year.

“As IAS19 deficits are falling, so too are buy-out deficits. At JLT we are seeing strong evidence that the pension buy-out market is showing signs of taking off – as competition between insurers is hotting up and prices are getting keener. With over £12bn of deals transacted in 2017, all the signs point to an even stronger year in 2018, where it is possible that up to £30bn of deals could be transacted.”

Cowling added: “At the same time we are now seeing some of the UK’s largest pension schemes closing to all future benefits – following the path that smaller pension schemes have been treading right across the private sector for over 10 years now. Tesco, Royal Mail and the Universities Superannuation Scheme have just closed, or are closing their doors, to existing members as well as new members. Combined with the increasing number of DB pension schemes looking to exit entirely through buy-outs, this now means that DB schemes are clearly disappearing from the private sector in the UK…and we predict that by 2020 there will be less than 5,000 private sector pension schemes left in the UK.”

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