U.K. corporate defined benefit pension funds recorded no change to their funding ratios over 2013, although rallying equity markets reduced deficits.
The funding ratios of FTSE 100 and FTSE 350 companies was 89% as of Jan. 31, and 87% for all corporate U.K. defined benefit funds, according to consultant JLT Group's latest monthly index tracking these figures on an IAS19 accounting measure, which is used in company reports and accounts.
These funding ratios were unchanged compared with the figures as of Jan. 31, 2013.
Deficits, however, were reduced by gains in the equity markets. FTSE 100 pension fund deficits were £59 billion ($96.3 billion), improving by 2%. FTSE 350 deficits fell by 5% to £58 billion, but all U.K. corporate DB funds saw deficits increase by 1% to £168 billion.
Declines in long-dated corporate bond yields offset better-than-expected returns on equities, said Charles Cowling, director of JLT. “Corporate bond spreads significantly narrowed over 2013, probably by 0.5%. The reason why the accounting numbers don't look as good as we might expect is because the narrowing of corporate bond spreads means that we have had an increase in the value of corporate bonds relative to gilts. That is what is used to measure liabilities in company accounts,” Mr. Cowling said in a telephone interview.
FTSE 100 and FTSE 350 pension fund liabilities increased 7% according to JLT, to £564 billion and £638 billion, respectively. All corporate U.K. pension fund deficits increased 1% to £1.289 trillion.