The combined deficit of UK defined benefit (DB) pension schemes fell by 20% last month, according to figures from the Pension Protection Fund (PPF).
The lifeboat fund’s 7800 index, which tracks the aggregate funding level of the 6150 schemes eligible for PPF entry, found the deficit fell from £76.5bn at the end of January to £61.2bn at the end of February.
This represented a funding ratio increase from 93.7% to 94.9% – higher than the 86.3% recorded in February 2013. Total assets were £1,148.6bn and total liabilities were £1,209.8bn. There were 3,947 schemes in deficit and 2,203 schemes in surplus.
Over the month, assets rose by 1.6%, while liabilities remained broadly unchanged, reflecting only small changes in nominal and index-linked gilt yields – 15-year gilt yields rose by one basis point, 15-year index-linked gilt yields fell by two basis points (bps), while the FTSE All-Share index rose by 4.9%.
Over the year to February 2014, 15-year gilt yields were up by 65bps and the FTSE All-Share rose by 9.5%.
A minor gain was also seen across the deficits of pension schemes of FTSE 350 companies in February, according to figures from Mercer published last week.
The consultant’s Pensions Risk Survey revealed the pension scheme accounting deficits of the UK’s largest 350 companies reduced slightly to £101bn (equivalent to a funding ratio of 85%) at 28 February 2014, compared to £104bn (equivalent to a funding ratio of 84%) at 31 January 2014.
It said this was a result of asset values increasing by £10bn through February from £562bn to £572bn, but this was offset to some extent by an increase in liability values, which increased by £7bn during February.
Mercer head of DB risk in the UK Ali Tayyebi said: “The recovery in the FTSE 100 during February to close to its all-time high, combined with deficit contributions which companies have been paying into their pension schemes over the last few years, took asset values to their highest ever month-end value.
“Nevertheless there was little relief for the aggregate pension scheme deficits. A small rise in the market’s expectations for long-term inflation meant that the increase in asset values was largely offset by an increase in the value of liabilities, and deficits stayed over £100bn.”
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