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Pension Funds

U.K. corporate deficits fall over month, year ended June

The total deficit of U.K. corporate pension funds fell 3.8% for the month ended June 30 to 176 billion ($228.2 billion), and dropped 15.8% over the year to that date, show data from JLT Employee Benefits.

The funded level of these plans remained steady over June at 90%, but improved from 87% as of June 30, 2016.

Assets fell 2.6% over June to 1.56 trillion, and liabilities fell 2.7% to 1.74 trillion. For the year assets grew 8.7%, and liabilities increased 5.6%.

For the largest 100 companies in the U.K., deficits fell 27% for the month and 24.6% for the year, to 46 billion. The funded level of FTSE 100 firms improved to 93%, from 91% each as of May 31, and June 30, 2016.

FTSE 350 companies also saw deficits improve, by 21.6% in June and by 19.4% for the year ended June 30, to 58 billion. The funded level was 93% as of end-June, up from 91% both one month and one year previous.

"This last month has seen a General Election and more political turmoil, yet markets continue to hold up well," said Charles Cowling, director at JLT Employee Benefits, in a statement accompanying the data. "As a result, DB pension deficits are drifting lower."

He said actuarial valuations are underway by many pension funds, with new deficit recovery contribution agreements beginning to take shape. "Even though deficits may have improved a little in recent months, for many pension schemes they will still be much higher than in 2014 when deficit contributions were last agreed. So, there may still be some very difficult discussions between companies and trustees over the coming months. But maybe the current respite delivered by buoyant markets is an opportunity for trustees and companies to explore liability settlement options for DB pension schemes, before market conditions turn and deliver another unwelcome surprise," added Mr. Cowling.