Liability increase fuels £30bn rise in UK DB pension deficit - PwC

The UK defined benefit (DB) pension deficit increased by a further £30bn to £270bn over June, according to figures from PwC’s Skyval Index.

The figures indicated that the jump in deficit had been driven by a £30bn increase in liabilities to £2,050bn in June, while assets remained steady at £1,780bn.

The index, which is based on the Skyval platform used by pension funds, provides an aggregate health check of the UK’s more than 5,000 corporate DB pension funds.

PwC chief actuary, Steven Dicker, said: “Pension liabilities continue to be volatile and, as in recent months, we’re seeing variations in the underlying drivers.

"The deterioration in the funding position in June is largely due to a small increase in long-term inflation expectations rather than the falls in asset values or long-term interest rates we have seen in previous months.”

The news from PwC is not the first indication that DB scheme deficits increased during June, with Mercer’s Pensions Risk Survey indicating that FTSE 350 companies’ DB pension scheme deficit rose by £18bn following a similar rise in liabilities.

Dicker continued: “As we begin to emerge from lockdown, scheme sponsors and trustees will wish to move their focus to the longer term and ensure they have a robust future funding plan - for many this will mean rethinking their strategies and resetting their journey plans.

“Different schemes and sponsors have weathered the crisis differently, so the issues they face and options available to them will vary widely. However, the key is arriving at an approach which maximises the chance of members’ benefits being paid in full, in the most capital efficient way possible.”

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