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Pension Funds

U.K. pension deficit falls as funding levels reach 95% in April – report

The total deficit of U.K. corporate defined benefit funds fell 40.5% for the month and 46.6% for the year ended April 30, to £78 billion ($107.5 billion).

The latest update by JLT Employee Benefits showed the funding level of these plans improved to 95% as of April 30, up from 92% a month earlier and 91% as of April 30, 2017.

Assets grew 1.3% in April to £1.54 trillion, but fell by 0.1% over the year. Liabilities dropped 2.1% for the month and 4.1% for the year to £1.62 trillion.

FTSE 100 company pension funds saw their deficit improve 57.1% to £15 billion as of April 31, with a funding level of 98%, compared with 95% at March 31. For the year, the deficit fell 62.5% and the funding level improved from 94% as of April 30, 2017.

The 350 largest companies in the U.K. saw their pension fund deficits fall 50% over the month and 56% over the year ended April 30, to £22 billion. The funding level as of April 30 was 97%, compared with 95% as of March 31 and 94% a year earlier.

"Markets continue to be positive for pension schemes and overall reported pension deficits are showing a strong improvement from 12 months ago," said Charles Cowling, director at JLT Employee Benefits, in a statement accompanying the update. "Indeed, the FTSE 100 is close to showing an aggregate surplus in its pension schemes for the first time in almost a decade. This is despite the recent poor GDP figures suggesting the U.K. economy is on the brink of stagflation."

Mr. Cowling added that the outlook for interest rates in the U.K. is crucial. "It had been thought quite likely that the Bank of England's Monetary Policy Committee would raise interest rates at their next meeting on May 10 but the latest weak GDP growth figures may once again have put back the date of the next interest rate rise. Additionally, the Bank of England is currently debating introducing greater clarity in its future interest rate plans, which would be of significant interest to pension schemes as they seek to plan and navigate their derisking paths," he warned.