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Pension Funds

U.K. corporate pension funds near full-funding levels

The total deficits of all U.K. corporate pension funds fell 20.9% in June to 34 billion ($44.7 billion), as the funds neared fully funded status.

The latest update by JLT Employee Benefits showed all U.K. corporate funds had a funded level of 98% at June 30, compared with 97% on May 31 and 92% a year ago. Deficits improved 75.4% from the previous year.

Assets held by these funds fell 0.3% for the month but grew 3% for the year, to 1.57 trillion; while liabilities fell 0.8% in June and fell 3.5% for the year, to nearly 1.61 trillion.

FTSE 100 company pension funds achieved fully funded status as of June 30, with a deficit of 1 billion. That represented a 75% fall from May 31, when the funded level was 99%. As of June 30, 2017, the funded level was 95%. During the year the deficit fell 97.3%.

FTSE 350 company pension funds saw deficits fall 44.4% for the month and 89.1% for the year, to 5 billion. The funded level was 99% as at June 30, steady from May 31; but improved from 94% as of June 30, 2017.

"Half-year results are strong for pension schemes when compared to the position 12 months ago and also against (Dec. 31)," Murray Wright, deputy chief actuary at JLT Employee Benefits, said in a statement accompanying the data. "Rises in corporate bond yields, alongside solid equity market returns have contributed to lower reported deficits."

Mr. Wright added that FTSE 100 firms "are very close to showing an aggregate surplus for the first time in a decade. This milestone highlights the striking point that these schemes are now in a position where they need to earn a return of less than 3% (per annum) on their assets over the long run to allow them to pay benefits as they fall due to members." He said that return over the long run "would generally be regarded as an achievable target for most schemes, even those running a low-risk investment strategy."