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PwC: DB pension funds deficit rose £60bn in March

Apr 08
Tags: PwC
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The deficit of defined benefit (DB) pension funds in the UK rose by a staggering £60 billion in March 2019, according to new figures from PwC. 

According to the data from PwC’s Skyval Index, the DB pension funds deficit stood at £260 billion by the end of March - a £60 billion increase from the end of February. 

The Skyval Index is based on the Skyval platform used by pension funds, providing an aggregate check of the 5,450 corporate DB pension funds in the UK. 

At the end of March, the index showed assets of £1,650 billion set against a liability target of £1,910 billion. The figures are based on the ‘gilt plus’ method used by scheme actuaries. 

PwC’s chief actuary Steven Dicker dubbed the figures “a sign of continuing economic uncertainty” and explained that the real yields on UK inflation linked government bonds have reached an all time low. 

He noted that this makes achieving real returns to support inflation linked pension benefits all the more difficult. It is this that has contributed to this month’s significantly increased deficit, according to Mr Dicker. 

He added: “The search continues for assets which can meet inflation linked benefit outgo but which yield higher than UK inflation linked government bonds.  Once implemented, these strategies help stabilise funding levels as the assets and liabilities move in parallel with market movements.”

However, Mr Dicker continued, suitable assets are in limited supply in ways pension schemes are able to invest in them.

“Action is needed, for example, to make much needed infrastructure investment opportunities more accessible to pension schemes,” he said.

Meanwhile, Mercer has reported the UK’s 350 largest listed companies have seen their deficit of their DB pension schemes hit an 18-month high, jumping from £45 billion at the end of February to £55 billion by the end of March. 

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