Mercer’s Pensions Risk Survey data shows that the accounting deficit of defined benefit (DB) pension schemes for the UK’s 350 largest listed companies increased from £72bn at the end of May 2020 to £90bn on 30 June.
Values rose by £24bn to £957bn at the end of June compared with £933bn at the end of May. Asset values were £867bn (an increase of £6bn compared to the corresponding figure of £861bn at the end of May).
Charles Cowling, Chief Actuary, Mercer said, “Pension deficits worsened again in the last month and compared to 12 months ago, as market turmoil continues to affect pension schemes. While coronavirus lockdown measures are easing across Europe, the global outlook remains bleak.
Coronavirus cases globally are not only increasing but accelerating, with South America and India seriously affected. The US is also showing signs of a significant second wave with increases in cases and mortalities.
Trustees need to understand the financial challenges facing businesses as the virus remains prevalent. Now is the time trustees should look to reduce risk.
Pensioner buyouts are one option which trustees should be actively monitoring. Mercer has just completed extensive research on over 70 bulk buyout deals.
This research shows that despite the potential cash drain and accounting impact of a buyout deal there is evidence to suggest buyouts have a neutral or positive impact on share prices – thus benefiting both trustees and employers.”
Mercer’s Pensions Risk Survey data relates to about 50% of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts.
The data underlying the survey is refreshed as companies report their year-end accounts. Other measures are also relevant for trustees and employers considering their risk exposure. Data published by the Pensions Regulator and elsewhere tells a similar story.
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