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U.K. corporate pension fund deficits rise slightly in February

The total deficit of U.K. corporate defined benefit funds increased 2.7% in February to £270 billion ($335.6 billion), and grew 147.7% for the year ended Feb. 28, said JLT Employee Benefits.

In its latest update, JLT said the funded status of these funds was flat over the month of February at 85%, but fell from 92% as of Feb. 29, 2016.

Total assets grew 2.7% for the month, and 19.2% for the year to £1.57 trillion. Asset growth was offset in February by a 2.7% increase in liabilities to £1.84 trillion, and more than offset by a 29% increase for the year.

FTSE 100 company pension fund deficits increased over the month by 2.2% to £94 billion and jumped 261.5% for the year. The funded level was flat over the month at 87%, but fell from 96% as of Feb. 29, 2016.

The deficit of FTSE 350 pension funds grew 2.8% in February, and 258.1% for the year ended Feb. 28, to £111 billion. The funding level was again flat over the month, at 87%, but fell from 95% as of Feb. 29, 2016.

“Pension deficits are broadly unchanged over the month but are still at challenging levels for many companies compared to those 12 months ago,” said Charles Cowling, director at JLT Employee Benefits, in a statement accompanying the data.

Mr. Cowling said a recent paper by the government considering security and sustainability in DB funds “does not seem to believe there is a significant structural problem with the funding and regulation of DB schemes.” He said the paper “will cause dismay for many companies where pension obligations are causing real distress and potentially threatening their very existence, as well as the livelihoods of their employees and pension scheme members.”

Separate data from PricewaterhouseCoopers' Skyval index show the deficit of U.K. DB funds was £520 billion at the end of February, up 15.6% over the month. The firm's analysis also showed that, in current monetary terms, it will take until 2050 to cut the value of today's total liabilities in half. The index covers about 5,800 DB funds.

In a statement accompanying the data, Raj Mody, global head of pensions at PwC, also addressed the government's paper and its suggestion there is no across-the-board systemic DB pension problem and that deficits are generally affordable.

He added: “(The paper) does not address fundamental questions about whether employers should be on the hook at all for deficits which have largely arisen due to external forces, including regulation. Given that, we expect a robust industry response wanting to develop concessions around inflation measures, for example, despite the challenges this presents for member expectations.”