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Pension Funds

JLT: U.K. corporate pension fund deficit improves for month, year

The total deficit of all U.K. corporate pension funds improved by 27% in November and improved by 51% for the year ended Nov. 30 to 48 billion ($61.5 billion), according to JLT Employee Benefits update.

The funding level of these pension funds was 97% as of Nov. 30 — an improvement from 96% in the previous month and an improvement over 94% as of Nov. 30, 2017.

Pension fund assets fell 2% for the month but grew 1.75% for the year to 1.514 trillion. Liabilities fell 3.1% in November and fell 4.69% for the year, to 1.562 trillion.

FTSE 100 firms saw deficits fall 88.9% in November and drop 95.5% for the year, to 1 billion. The funding level was 100% as of Nov. 30, up from 99% a month earlier and up from 97% a year earlier.

For FTSE 350 companies, deficits were at 6 billion, falling 60% for the month, and improved 79.3% for the year. The funding level improved to 99% over the month from 98% in October and improved from 96% as of Nov. 30, 2017.

A potential impact on funding is the compulsory guaranteed minimum pension equalization between male and female workers, ruled on last month, which is expected to affect sponsoring employers' bottom line, depending on the method employed by them to accomplish the equalization.

"The Lloyds Banking Group case on guaranteed minimum pension equalization continues to keep the pensions industry awake at night," said Charles Cowling, JLT's chief actuary, in a news release accompanying the update. "The industry is slowly coming to terms with the scale of the task ahead and the efforts necessary to resolve the sex discrimination caused by (pension equalization). Pension schemes are going to have to recalculate benefits for millions of members, demanding fiendishly complicated calculations that will incur huge additional costs and resources. Moreover, ongoing administration costs for pension schemes are likely to increase significantly as a result."

Mr. Cowling added: "Of course, this blow has come at a time when U.K. pension schemes and, indeed, the wider economy are facing a looming front of uncertainty as the Brexit deadline draws ever nearer. At this stage, it is impossible to know what impact Brexit will have — over either the short or longer term — but that very risk, and accompanying market uncertainty and volatility, is all the more reason for trustees and companies to be looking to take pension risks off the table."