UK Corporate DB Plans’ Deficit Soars 60% in March

Despite the sharp rise, the aggregate deficit is down 29% from 2017.

The aggregate deficit of the 5,588 schemes in the PPF 7800 Index is surged 60% to £115.6 billion ($164.5 billion) during March, from a deficit of £72.1 billion at the end of February, according to the Pension Protection Fund, the UK’s pension lifeboat for collapsed companies. 

Despite the sharp increase in the funds’ deficit during the month, it is still down nearly 29% from the same time last year, when an aggregate deficit of £161.8 billion was recorded at the end of March 2017.

As a result of the increased deficit, the aggregate funding level for the funds decreased to 93.1% from 95.6% the previous month, but was above the 90.5% funded level reported at the same time last year.

Total assets were £1.57 trillion, a 0.1% decline during the month, and a 1.6% increase from the year-ago period, while total liabilities rose 2.5% to £1.68 trillion for the month, but fell 1.3% over the year.

Nearly 68% of the plans, or just under 3,800 were in deficit, up from just over 3,600 at the end of February (64.6%), but down over the course of the year from nearly 4,000 (71.3%). Meanwhile, the number of plans in surplus decreased to just under 1,800 at the end of March (32%) from 1,980 at the end of February (35.4%), but increased from just over 1,600 plans surplus at the end of March 2017 (28.7%).

Among the plans in deficit, the aggregate deficit at the end of March increased to £217.6 billion from £187.6 billion at the end of February. However, this was still below the £246.7 billion aggregate deficit reported at the end of March 2017. And among the plans in surplus, the total surplus fell to £101.9 billion at the end of March from £115.5 billion at the end of February, but rose from the year-ago period when the total surplus of all plans in surplus stood at £84.9 billion.

The PPF reported that liabilities increased by 2.5% during the month, as conventional 15-year gilt yields fell by 19 basis points, and index-linked 5- 15 year gilt yields rose by 1 basis point from the end of February. Assets decreased by 0.1% in March, as equity prices moved lower, but were offset by an increase in bond prices. Over the year to March, conventional 15-year gilt yields were up by 7 basis points, index-linked 5- 15-year gilt yields were up by 34 basis points, and the FTSE All-Share Index was down by 2.7%.

According to the PPF, equity markets and gilt yields are the main drivers of funding levels, while S179 liabilities are sensitive to the yields available on a range of conventional and index-linked gilts.

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