Pension deficits among FTSE350 companies have increased significantly over the past month, due to market volatility.
Mercer’s latest Pensions Risk Survey shows the accounting deficit of the DB schemes from the 350 largest companies in the UK increased from £57bn at the end of January 2020 to £68bn at the end of February. Over the month the deficit was as high as £80bn as liability values have fluctuated.
The data also showed that liability values fell slightly, by £2bn to £914bn compared to £916bn at the end of January. Asset values were £846bn — a fall of £13bn compared to the corresponding figure of £859bn at the end of January.
Mercer partner Charles Cowling says: “Funding positions have declined this month as the impact of the coronavirus has sent shock waves through global markets.”
He adds: “With asset values falling and pension liabilities increasing, 2020 may be a difficult year for actuarial valuations and trustees would be well advised to start their planning early.”
Cowling points out that this outbreak is not only causing disruption to stock markets and international trade and supply chains.
He says it may also have an “unwelcome” impact on interest rates, as any slowdown in the economy could cause rates to be cut further.
He adds: “Some industries are already being hit hard by coronavirus and for many companies it is going to have a significant impact on financial results.
“Trustees must be alert to the impact that coronavirus is having on the strength of many sponsoring employers.”