U.K. corporate pension funding unchanged; PPF-monitored funds improve — reports

The aggregate funding level of FTSE 350 corporate pension funds was unchanged in 2012, despite positive returns and an aggregate £20 billion ($32 billion) in additional contributions, according to data released on Tuesday by Mercer.

Separately, overall U.K. pension funding levels for about 6,300 defined benefit pension funds monitored by the Pension Protection Fund slightly improved, averaging about 81.3% as of Dec. 31 compared to 78.9% a year earlier. In the same period, the aggregate deficit for the funds in the PPF 7800 index fell to £244.7 billion from £268.9 billion, according to data from the PPF.

The number of U.K. pension funds that have a deficit also fell during the year, decreasing to 5,173 from 5,263.

In December alone, 15-year U.K. government bond yields increased by eight basis points, and aggregate liabilities for the PPF 7800 index fell by 0.4% over the month. The 81.3% funding level at the end of December was also an improvement from 80.8% a month earlier.

For the year ended Dec. 31, however, 15-year U.K. government bond yields fell by 15 basis points, while the FTSE All-Share index rose by 8.2%, according to the PPF.

Bond yields used to discount future pension liabilities largely decreased during the year and the resulting liabilities increase “was not matched by a decrease in market implied inflation,” according to an analysis of FTSE 350 pension deficits data from Mercer. Aggregate liabilities for FTSE 350 DB funds increased to £588 billion from £548 billion a year earlier. At the same time, asset values increased to £526 billion from £487 billion during the same period, due to positive investment returns and company contributions.

The aggregate pension accounting deficit for the FTSE 350 as of Dec. 31 stood at £62 billion, or an estimated 89% funding ratio, which is the same as it was a year earlier, according to Mercer.