The 350 largest UK-listed businesses’ defined benefit (DB) pension accounting surplus rose to £59bn from £66bn by the end of March 2024, according to Mercer’s Pensions Risk Survey data.
According to Mercer, in March, bond yields and inflation expectations saw slight decreases. Mercer’s Pensions Risk Survey analysis revealed a modest increase in the surplus of FTSE 350 pension funds’ accounting position.
The increase was attributed to a rise in asset values, from £662 billion to £679 billion, despite liabilities also experiencing a slight increase.
Mercer’s survey data covers around half of all UK pension scheme liabilities, which focuses on deficits determined by using the accounting practices of the participating companies.
Adam Lane, head of corporate investment consulting at Mercer, said “With DB schemes currently well-funded, the Government has turned its attention to encouraging them to invest for UK growth in what it calls productive assets. But we worry that many UK pension schemes will not be rushing to invest in such assets as they continue to de-risk.”
“The Government is currently consulting on measures to encourage Defined Benefit (DB) schemes to “invest for surplus” in productive asset types, but whether this will work as intended is to be seen.
“Pension schemes, like all investors, need compelling investment opportunities and for those opportunities to meet their requirements. The nature of DB schemes means that risky, illiquid or non-competitive UK assets will not fit the bill unless they are adequately compensated.”