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 at the end of June moved to a surplus over the course of the month, standing at a total surplus of £11bn by 30 June 2022.
Liabilities fell from £716bn at 31 May 2022 to £667bn at the end of June driven by further rises in corporate bond yields and a small fall in the market’s view of future inflation. This more than offset the fact that asset values also fell, to £678bn compared to £712bn at the end of May.
Tess Page, Mercer UK Wealth Trustee Leader, said: “For the first time in over three years, the month-end aggregate funding position on an accounting basis is expected to be showing a surplus, and yet again the main driver was bond yields.
“Employers and Trustees will be looking to control risk, and funding improvements offer a fantastic opportunity to bank these gains. We expect that schemes will be exploring the right actions for their circumstances – ranging from a simple change in investment strategy to securing benefits with an insurance company. Those schemes with clear journey plans will be best-placed to act quickly.”
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.