The total deficit of corporate pension funds in the U.K. hit £273 billion ($393 billion) at March 31, up 30.6% over the month, said JLT Employee Benefits.
In its latest monthly index, the consultant found the total deficit also increased 1.9% vs. March 31, 2015.
A 1.6% increase in total assets over the month, to £1.25 trillion, was not enough to offset a 5.8% increase in total liabilities to £1.523 trillion. Over the 12-month period, assets fell 2.4% and liabilities fell by 1.7%.
The funded level of all corporate pension funds was 82% as of March 31, compared to 85% as of Feb. 29 and 83% as of March 31, 2015.
The total deficit of FTSE 100 company pension funds increased 40.3% over the month to £87 billion at March 31, while the funded level fell to 86% from 90%. Over the year, total deficits and the funded level were unchanged.
However, FTSE 350 companies also saw a 40.3% increase in deficits, jumping to £101 billion over the month. The funded level dropped to 86% from 89% as of Feb. 29. Over the year ended March 31, deficits increased 1%, with the funded level flat at 86%.
In a statement accompanying the data, Charles Cowling, director at JLT Employee Benefits, warned that reforms by the U.K. chancellor of the exchequer “are threatening to make pensions an endangered species. The changes to the lifetime and annual allowances have made pensions almost irrelevant for high earners; freedom and choice is encouraging people to cash in their pensions; and most recently pensions have become far less attractive for the under 40s in comparison to the Lifetime ISA. It is easy to see why some are saying that (Chancellor) George Osborne has a long-term unspoken strategy of getting rid of pensions altogether.”
Mr. Cowling said that while Mr. Osborne is encouraging reductions in future retirement provision, liabilities are not going away, and “continue to cause angst and major problems for company management and pension scheme trustees alike.” He said pension funds that have not yet hedged liabilities should “look for any and every opportunity to secure and hedge pension liabilities — even if it does mean locking into a loss.”
