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  2. PENSION FUNDS
June 09, 2020 10:07 AM

U.K. deficits rise as coronavirus continues to hit markets

Paulina Pielichata
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    U.K. pension pounds
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    Liability values of U.K. pension plans rose in May on the impact of the coronavirus pandemic on markets.

    The total deficit of U.K. defined benefit funds covered by the Pension Protection Fund's 7800 index worsened 37% in May to £176.3 billion ($217.6 billion).

    The deficit was £128.5 billion as of April 30. The deficit of U.K. defined benefit funds also deteriorated over the year ended May 31, from £38.1 billion as of May 31, 2019, London-based PPF said Tuesday in an update.

    The funding ratio of the corporate pension plans covered by the index decreased over the month to 90.9% as of May 31, down from 93.1% as of April 30. The funding ratio was 97.7% a year ago, the update said.

    Assets increased 1.4% during the month and rose 8.6% for the year ended May 31, to £1.769 trillion. Liabilities increased 3.8% over the month and increased 16.7% for the year, to £1.945 trillion.

    See more of P&I's coverage of the coronavirus

    The FTSE All-Share index improved 3.4% for the month but fell 11.2% for the year ended May 31, the PPF said. The PPF is the lifeboat fund for the defined benefit plans of insolvent U.K. companies.

    Five- to 15-year index-linked gilt yields decreased 29 basis points in May, and fell 51 basis points over the year.

    As of May 31, 66.8% of the 5,422 pension funds covered by the index were in deficit, compared with 64.6% as of April 30. A year ago, 70.6% of the 5,422 pension funds were in deficit.

    "The impact of (the COVID-19 pandemic) continued to dominate global markets in May. Whilst equity markets continued their rebound throughout the month, widening inflation expectations saw a sharp decrease in real yields and therefore a corresponding jump in liability values," Sion Cole, head of U.K. fiduciary business, at BlackRock said in an emailed comment.

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