The aggregate defined benefit pension plan funding ratio improved slightly for companies in the FTSE 350 to 85% in February, from 84.4% the previous month, due to strong stock market returns, even though those returns were slightly offset by an increase in liabilities, according to Mercer's Pensions Risk Survey.
As of Feb. 28, the estimated aggregate assets for the companies totaled £572 billion ($956 billion), up from £562 billion a month earlier, outdistancing the increase in liabilities, which rose to £673 billion from £666 billion in the period.
“Whilst aggregate deficits have remained relatively stable over the last 12 months, with the funding ratio hovering in the range (of) 84% to 88%, on a company-by-company basis there has been a divergence in experience. Schemes of companies who have taken action, e.g. by hedging inflation rates, will have seen better outcomes than schemes of companies who have not,” said Adrian Hartshorn, senior partner in Mercer's financial strategy group, in a news release. “These decisions to hedge risk have important financial consequences and should be considered carefully by both trustees and sponsors of defined benefit plans.”
Mercer's estimates are based on projections from FTSE 350 companies' reported financial statements.