FTSE 350 DB scheme deficit falls by £4bn despite global uncertainty

The accounting deficit of FTSE 350 companies’ defined benefit (DB) pension schemes fell by £4bn in February to £76bn, despite inflationary concerns and global market uncertainty, according to Mercer’s Pension Risk Survey.

The data revealed that accounting liabilities for UK DB schemes had fallen to £846bn, down from £879bn at the end of January, although this was partially offset by a fall in asset values from £799bn to £770bn during February.

Commenting on the figures, Mercer UK wealth trustee leader, Tess Page, noted that whilst any comments will be out of date quickly given the "very fluid" situation, in the short term the conflict had not had a significant impact on the figures for February.

“The tragic situation in Ukraine is quite rightly at the top of the news agenda," she continued. "It is too soon to know what the longer term economic impacts will be.

"However, it seems likely that they will include higher energy prices, further disruptions to supply chains, market volatility and liquidity pressures.

“Whilst UK DB pension schemes typically have very low direct exposure to Russia, it is the wider market fall-out that will test integrated risk management plans. As ever trustees who have taken steps to understand and control their risk exposures should be better placed.”

A number of pension schemes have already announced plans to divest from Russian holdings amid sanctions that were introduced as part of the global response to the Russia's invasion of Ukraine, although legal experts have also emphasised the need to ensure a financial basis for any exclusion decisions.

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