The total deficit of all corporate defined benefit funds in the U.K. decreased 17.1% to £209 billion ($301 billion) in February, despite uncertainty over the U.K.'s future in the European Union and low interest rates, said an analysis by JLT Employee Benefits.
Over the 12-month period ended Feb. 29, deficits fell 17.4%.
Total assets of these corporate funds increased 0.6% to £1.23 trillion over the month, but decreased 2.9% over the year ended Feb. 29. Liabilities fell over the month by 2.4%, and over the year by 5.3%, to £1.44 trillion.
The funding ratio of these pension funds improved to 85% from 83% as of both Jan. 31 and Feb. 28, 2015.
The pension funds of FTSE 100 companies also saw a fall in deficits, of 19.5% to £62 billion over the month ended Feb. 29. Over the year, deficits fell 27.1%. The funding ratio improved to 90%, from 87% as of both Jan. 31 and Feb. 28, 2015.
FTSE 350 company pension fund deficits decreased 19.1% to £72 billion over the month, and by 25.8% over the year. The funding ratio improved to 89% as of Feb. 29 from 87% for both a month earlier and year earlier.
Charles Cowling, director at JLT Employee Benefits, said in a statement accompanying the data that 10-year Japanese bond yields have fallen below zero and 10-year German bonds have moved closer to zero. He also highlighted comments by Mark Carney, governor of the Bank of England, to members of Parliament that the bank could cut interest rates toward zero if the outlook for the U.K. economy worsens.
“In light of this uncertainty, it would make sense for companies and trustees to seek opportunities to lock into any small improvement in their funding position, through (liability-driven investing) strategies, liability management exercises and buyouts, and aim to reduce the risk being carried in their pension schemes,” Mr. Cowling said.
