FTSE 100 pension scheme deficit falls by £13bn in 2018

The combined deficit of FTSE 100 DB pension schemes dropped by £13bn to £20bn over the past 12 months, according to JLT Employee Benefits' latest monthly funding update.

Commenting on the report, JLT chief actuary, Charles Cowling said: “2018 was a turbulent year for pension schemes but it was not all negative.

"Markets were initially strong in the face of considerable political uncertainty and signs emerged that interest rates are at last on the way up."

However, he added: “There is no sign yet of an unwinding of the Bank of England’s position on quantitative easing."

The deficit of FTSE 100 schemes increased by £19bn in comparison to the end of last month (31 November), from £1bn to £20bn.

JLT’s latest figures in its monthly index on UK private sector defined benefit schemes revealed FTSE 100 companies have assets of £646bn and £666bn in liabilities at 31 December 2018. This gives the schemes a funding level of 97 per cent.

Compared to this time last year, asset values and liabilities have fallen by £42bn from £688bn and £56bn from £722bn, respectively.

Cowling continued: “It is a very mixed picture for companies and their pension schemes.

“Some have successfully navigated the turbulent markets, have paid in significant additional contributions and are now looking to lock down on emerging pension surpluses by securing pension liabilities in the insurance market.

“We believe that 2019 will be another bumper year for insurance company buy-outs, possibly enhanced by the emergence of other superfund consolidators, who are looking at different and cheaper routes for companies to offload their pension liabilities.

“But other companies are still facing extremely difficult times. They may have gambled too much and in vain on equity returns and rising interest rates to save them from debilitating pension deficits.”

The FTSE 350 pension scheme deficit also fell from December 2017, from £43bn to £29bn, while assets over the same period decreased from £777bn to £729bn, liabilities fell from £820bn to £758bn and the funding level increased from 95 per cent to 96 per cent.

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