Pensions - Articles - FTSE350 pension deficits fall despite threat of inflation

 Charles Cowling, Chief Actuary at Mercer, said: ““Funding levels continue to improve as markets remain favourable, despite the looming threat of inflation and the UK’s challenging emergence from the Covid-19 lockdown. This month, inflation hit a two-year high and the Bank of England expects it to rise further. However, the Bank still voted last week to hold interest rates at their current record low levels and their quantitative easing program unchanged.”

 Mr Cowling continued: “These conditions are challenging for pension schemes and trustees who, with no respite on persistently high pension liabilities, are being called on by TPR to establish a clear path to their long term objective. But with positive market conditions, there are opportunities for trustees to lock into gains and get ahead on this journey. Trustees should therefore be vigilant to such opportunities and consider planning now how they propose to meet the Regulator’s new objective.”

 Mercer’s Pensions Risk Survey data relates to about 50% of all UK pension scheme liabilities, with analysis focused on pension deficits calculated using the approach companies have to adopt for their corporate accounts. The data underlying the survey is refreshed as companies report their year-end accounts. Other measures are also relevant for trustees and employers considering their risk exposure. Data published by the Pensions Regulator and elsewhere tells a similar story.