UK private sector DB pension schemes have reached a funding level of 94% as of 31 March 2011, a report by JLT Pension Capital Strategies (PCS) has found.

Using the standard accounting measure (IAS19 / FRS17) used in company reports and accounts, PCS found UK private DB schemes to have £993bn in assets and £1,056bn in liabilities, creating a funding total of 94%. The funding level for all private DB schemes in 2010 was 86%, PCS claimed.

FTSE 100 companies were estimated to have £410bn in assets and £442bn in liabilities, giving them a funding level of 93%. FTSE 350 companies also had 93% funding, with £471bn in assets and £508bn in liabilities.

PCS managing director Charles Cowling commented: "Despite the recent turmoil in markets, due largely to international crises, the last 12 months have been quite good for companies weighed down by pension liabilities and deficits, with total deficits reducing from £156bn to £63bn. In part this has been due to the Government's changes to statutory pension increases moving from an RPI base to a CPI base.

"However, these are still very difficult times for DB pension schemes which are increasingly looking at end-game strategies and solutions. The new tax changes restricting benefits to high earners, which come into effect next week, are accelerating the demise of DB pension schemes. As it becomes more difficult and illogical to include key employees in the membership of DB pension schemes, so employers become less keen to provide DB pensions to other employees.

“In addition, there are all the impending costs (and difficulties) associated with the introduction of auto-enrolment of employees generally into pension schemes starting next year. Sadly, as a result, we believe 2011 will be the year when the majority of DB pension schemes are finally closed to all employees."

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