FTSE 100 DB deficit falls by £8bn

The combined deficit of the FTSE 100 defined benefit pension schemes fell by £8bn to £13bn over February, according to JLT Employee Benefits latest index figures.

The deficit has almost halved compared to the same time last year, recorded at £24bn.

At the end of February 2019, assets totalled £646bn compared to liabilities of £659bn, with a funding level of 98 per cent.

Commenting on the figures, JLT Employee Benefit chief actuary, Charles Cowling, said: “Despite the continued political turmoil in Westminster and across the EU, the last month has seen little change to the aggregate position for FTSE 100 pension schemes which continues to show a modest overall deficit.

“Recent inflation figures have been positive and markets are holding up despite the increasing uncertainty and proximity of a potential Brexit endgame.”

Cowling added whatever the outcome of Brexit, pension schemes will be facing a “high risk of more volatility” over the next few years, particularly as the bank of England indicated that interest rates could move in either direction.

The FTSE 350 DB pension scheme deficit also fell over February from £29bn to £20bn, a £4bn decrease on last year. Assets were recorded at £731bn, while liabilities totalled £751bn, delivering a funding level of 97 per cent.

“Trustees and companies should urgently look at their hedging strategies on interest rates and inflation and check whether increases to the level of protection are now appropriate.

"Trustees would not gamble pension scheme money on black or red in a game of roulette – I’m not sure that gambling on the next direction for interest rates is any better,” Cowling concluded.

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