FTSE350 Pensions Blackhole Is £4 Billion Deeper

The pensions blackhole of Britain’s largest companies expanded by £4 billion  in February, according to the latest data.

The FTSE350 companies saw their pensions fall even further into the red – from £41 billion to £45 billion.

The increase is blamed on market implied inflation, which is the difference between corporate bond yields and returns from the FTSE All-Share Index, which stands at 3.47%, says benefits consultancy publishing the data, Mercer.

This inflation lifted current and future pension fund liabilities by £5 billion with £1 billion set off by improved bond yields.

Maria Johannessen, Partner at Mercer, said: “It is disappointing to see the pension gap increase in February, having held steady in January. A £1 billion increase in asset valuations wasn’t enough to offset a big rise in liabilities driven by an increase in market implied inflation alongside a small fall in corporate bond yields.

Brexit uncertainty may worsen deficit

“The rising deficit reinforces how important it is for trustees to manage risk and shield themselves from market movements.”

The company also warned Brexit uncertainty in the lead-up to Britain departing the European Union on March 29 may adversely impact pensions funds.

LeRoy Van Zyl, a strategic advisor and Partner at Mercer, said: “Funding level volatility is set to continue over an important few weeks for British politics, alongside an uncertain global economic environment.

“As the UK edges closer to the Article 50 deadline, it’s important both trustees and scheme sponsors take the time to fully understand the risk they’re running and are prepared to take action to ensure it falls within their risk appetite.”

In February, FTSE 350 pension liabilities increased from £806 billion to £811 billion, while assets increased from 3765 billion to £766 billion.

FTSE 350 Pension deficits and funding levels since 2012

Source: Mercer

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