The total deficit of all U.K. corporate defined benefit funds fell 15.3% in February and 41.7% year-over-year to £105 billion ($146.4 billion), JLT Employee Benefits said.
The consultant's latest update showed the funding level of these pension funds improved to 94% as of Feb. 28, compared with 93% as of Jan. 31 and 90% as of Feb. 28, 2017.
Assets fell 2% in February and dropped 3% over the year to £1.524 trillion, but both figures were more than offset by falling liabilities. Total liabilities decreased 3% over the month and 7% over the year to £1.629 trillion.
FTSE 100 company pension fund deficits also fell, by 31.4% in February and 53.8% over the year ended Feb. 28, to £24 billion. The funding level of these pension funds improved to 97%, up from 95% as of Jan. 31 and 93% as of Feb. 28, 2017.
FTSE 350 company pension fund deficits decreased by 27.3% in February and 49.2% for the year ended Feb. 28, to £32 billion. Funding levels also improved to 96% as of Feb. 28, compared with 95% a month previous and 92% a year earlier.
"Once again, markets have been reasonably benign for pension schemes this month and overall reported pension deficits have continued to drift downward," Charles Cowling, director at JLT Employee Benefits, said in a statement accompanying the update. "However, this positive picture masks ongoing challenges for a number of companies with large pension schemes, evidenced this week by news that the Toys R Us pension scheme will soon be following Carillion's scheme into the Pension Protection Fund," the U.K.'s lifeboat for the pension funds of insolvent companies.
Mr. Cowling added that pension funds may need additional cash contributions, depending on the calculation used for deficits. "This will come as a difficult message for both schemes and sponsors, at a time when the tension between funding deficits and paying dividends to shareholders has already spilled over."
Mr. Cowling said executives expect the regulator to "take a tougher stance on companies prioritizing dividends to shareholders over contributions to pension schemes in its 2018 annual funding statement."
