The total deficit of U.K. defined benefit funds covered by the London-based Pension Protection Fund’s 7800 index dropped sharply in November, by 37.5% to £78.8 billion ($104.9 billion).
For the year, the deficit grew 77.5%.
The PPF said in an update Tuesday that the funding ratio of these pension funds increased to 95.8% as of Nov. 30, from 93.3% as of Oct. 31. The funding ratio fell from 97.5% as of Nov. 30, 2019.
Total assets grew 1.9% over the month and 5.4% for the year to £1.8 trillion. The FTSE All-Share Total Return index gained 12.7% in November but fell 10.3% for the year ended Nov. 30. The FTSE All-World Ex-U.K. Total Return index, however, gained 8.7% in November and 13.1% for the year.
Total liabilities fell 0.8% in November but grew 7.3% for the year, to £1.88 trillion, the update said. Five- to 15-year index-linked gilt yields were up 5 basis points in November but fell 40 basis points for the year.
As of Nov. 30, 60.5% of the 5,318 pension funds in the index were in deficit, with the remaining 39.5% in surplus. A month earlier, 63.9% of funds were in deficit. As of Nov. 30, 2019, 58.1% of the 5,422 funds in the index were in deficit.
The improved funding ratio "has been caused by increased equity prices and bond yields which have led to better asset values and lower liability values," said Lisa McCrory, chief finance officer and chief actuary, in a comment accompanying the update. However, she warned that the improved position "is against the backdrop of a continuing challenging environment."
The PPF is the lifeboat fund for the pension plans of insolvent U.K. companies.
