UK DB pension deficit increases by £60bn

The UK’s defined benefit pension scheme deficit increased by £60bn to £260bn at the end of March, PwC’s Skyval Index has revealed.

The index, which checks in with the UK’s 5,450 DB pension funds found that total assets hit £1.650bn, while the liability target was recorded at £1,910bn.

The figures, which are based on the ‘gilt plus’ method used by scheme actuaries, are a £60bn deficit increase at the end of February, which saw a £10bn increase in liabilities offset by a £20bn increase in assets.

Commenting on the figures, PwC chief actuary, Steven Dicker, said: “A sign of continuing economic uncertainty, the real yields on UK inflation linked government bonds have reached an all-time low.

"This makes the challenge of achieving real returns to support inflation linked pension benefits even more difficult, contributing to this month’s significantly increased deficit."

He added that pension schemes are continuing to search for assets which can meet inflation-linked benefits, with a higher yield than UK inflation government linked bonds.

“Once implemented, these strategies help stabilise funding levels as the assets and liabilities move in parallel with market movements.

“Suitable assets are, however, in limited supply in ways pension schemes can invest in them. Action is needed, for example, to make much needed infrastructure investment opportunities more accessible to pension schemes.”

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