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Revised mortality tables spur 36% drop in U.K. pension deficit in March — analysis

The total deficit of U.K. corporate pension funds fell 36.3% to £172 billion ($214.2 billion) over March, mainly due to changes in U.K. mortality tables, shows an analysis by JLT Employee Benefits.

For the year ended March 31, deficits grew 5.5%.

Updated mortality tables published by the Continuous Mortality Investigation — which is supported by the Institute and Faculty of Actuaries and provides independent mortality and sickness rate tables for U.K. life insurers and pension funds — has shown “that we are not living quite as long as had been predicted a few years ago,” said Charles Cowling, director at JLT Employee Benefits, in a statement accompanying the data. “Indeed, what had been put down to a blip in mortality data caused by a hard winter and some bad flu experience now may be part of a longer-term trend.”

A spokeswoman for JLT confirmed the changes were mainly due to the latest mortality tables. This could have a huge impact on pension funds, and the consultant responded by reducing its estimate of the total deficit in the U.K. corporate sector.

Assets grew 0.3% over March and 17.4% for the year ended March 31, to £1.58 trillion. Liabilities fell following the revision by JLT to take mortality changes into account, dropping 5.1% over the month to £1.75 trillion. Over the year, liabilities grew 16.2%.

The funded level of these funds increased to 90% from 85% as of Feb. 28 and 89% as of March 31, 2016.

FTSE 350 company deficits fell 39.6% for the month of March, but grew 19.6% for the year, to total £67 billion. The funded level of these pension funds grew to 92% from 87% on Feb. 28 and flat from a year earlier.

FTSE 100 company deficits also fell, by 40.4% in March to £56 billion. For the year, deficits grew 19.1%. The funded level increased to 92% as of March 31, up from 87% a month earlier and flat for the year.

“In a period when Article 50 was triggered (to exit the European Union) and many voices of doom had predicted chaos in markets and more trouble for pension schemes, we have in fact seen fairly calm markets and a boost to pension schemes in the form of these latest mortality tables,” added Mr. Cowling.