FTSE 350 deficit grows by £10bn; reaches 18-month high

The pension deficit of the FTSE 350 grew from £45bn to £55bn over March, the largest it has been for 18 months, according to data from Mercer.

The latest Pensions Risk Survey published yesterday, 4 April, found that the overall deficit for the UK’s largest companies increased by £10bn, due to a decline corporate bond yields.

Liabilities increased from £811bn to £847bn while assets increased from £766bn to £792bn over the same period.

According to Mercer, the liability increase was partially offset by a fall in market implied inflation.

Mercer corporate consulting leader, Maria Johannessen, said: “The pension gap has widened for the second consecutive month, despite a £26bn increase in asset values, and has now reached its highest month-end level since October 2017 having doubled over the past year alone.

“A slight fall in medium-term market implied inflation to 3.45 per cent was unable to mitigate the decline in corporate bond yields which led to a £36bn increase in liabilities.”

The consultant said the increase confirms the need for a wholesale approach to risk management.

Mercer strategic adviser and partner, Le Roy van Zyl, added: “With the political uncertainty in the UK set to continue and evidence of a slowdown in the global economy mounting, it is important for scheme trustees and sponsors to remain vigilant and prioritise risk management.

“This must be in context of the added emphasis from The Pensions Regulator on managing to a clear long term objective. The UK’s future relationship with the EU is no clearer, and we can expect funding level volatility to persist until greater clarity is found.”

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