UK pension deficits at record year-end level
The combined deficit of
UK private sector defined benefit (DB) pensions schemes was £434bn ($533bn) at
the end of 2016, compared to £233bn year-on-year, according to research by JLT
Employee Benefits.
While total private sector DB pension scheme assets increased from
£1,225bn to £1,448bn during 2016, liabilities jumped by a larger amount from
£1,458bn to £1,882bn.
FTSE 100 companies’ DB assets increased from £536bn to £596bn while estimated
liabilities rose from £606bn to £765bn. The deficit of increased from £70bn to
£169bn.
The picture was similar for the broader-based FTSE 350. FTSE 350 companies’
assets increased from £605bn to £675bn during 2016, with liabilities increasing
from £686bn to £866bn. The deficit increased from £81bn to £191bn.
Charles Cowling, director at JLT Employee Benefits said: “This last
month we have seen a slight deterioration in deficits but they are still below
the record heights of over £500bn recorded at the end of August, as markets
rallied from Brexit and the US election shocks.
“However, pension scheme deficits are still significantly larger than
the levels at the start of the year and there appears to be no relief in sight
for companies with large pension schemes. Indeed, these figures represent a
record year end deficit position for companies and their pension schemes.”
Cowling stressed that companies’ accounts will show a “market
deterioration” in their year-end pension numbers. “There will be instances
where the pension scheme will represent a serious threat to the company’s
balance sheet and, in some cases, the company’s ability to pay dividends.”
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