On the go: The deficit of UK corporate defined benefit schemes dropped by £30bn to £190bn during November – its lowest level since May, when it reached £180bn, according to PwC.
The consultancy’s Skyval Index, which provides a health check of some 5,450 DB plans based on the 'gilts plus' method, showed that pension scheme assets totalled £1.7bn, while liabilities reached £1.9bn.
According to Steven Dicker, PwC’s chief actuary, the reduction in deficit this month is mainly due to a rally in global equity markets boosting pension funds' assets over November.
“The measured liabilities link to gilt yields, which have moved little over the month.”
Data from Mercer showed a similar story, with FTSE 350 companies with DB schemes registering an accounting deficit of £38bn in November, £3bn less than the previous month.
By the end of November, liability values decreased by £1bn to £882bn, while asset values stood at £844bn, £2bn more than in October.
Charles Cowling, partner at Mercer, noted that the political turmoil in the UK is likely to last beyond the general election, causing continued nervousness and volatility in markets.
“In the last month, markets have had reason to reflect some early Christmas cheer. Inflation has dipped to 1.5 per cent – largely as a result of fuel prices and changes to the energy price cap – and despite the lowest annual growth rate in a decade the UK did not fall into recession this year.”
He added: “This general weakness in the economy has prompted speculation that interest rate cuts are likely in 2020.
“The Bank of England believes leaving the EU could lead to slower economic growth than previously forecast. The good news for trustees is that the current market buoyancy provides opportunities to take pension risk off the table, possibly through the settlement of pension liabilities.”
