How Well Are Workplace Pensions Really Performing?

The state of Britain’s workplace direct benefit pensions is getting better – or maybe not, depending on which firm’s figures you take.

The figures are confusing because at least three different firms track the health of workplace pensions, but all measure them in a slightly different way.

The deficit of the UK’s workplace pensions stayed the same, according to PwC Skyval. The index takes figures from around 5,800 UK direct benefit schemes and reckons the total deficit for May was £200 billion

Steven Dicker, PwC’s chief actuary, said “The aggregate deficit continued recent falls for most of the month.  However, the last week of May has seen the deficit pushed back up and it ends the month at £200bn which is unchanged from last month.

“Asset performance was positive over the month. However, this was offset by an increase in the value of liabilities due to movement in the market indicators used in their measurement.

Volatile climate

“The past week shows that the funding level remains volatile and this is likely to be the case throughout 2018 while we await a clearer economic picture.”

Over at consultancy Mercer, the pension figures come from FTSE350 companies.

Mercer explained the pension gap for these companies fell by £16 billion in May to £34 billion.

Rising share prices and a slight fall in liabilities contributed to the shrinking pension gap, said the firm.

Mercer say their figures relate to around 50% of all UK pension scheme liabilities.

Alan Baker, partner and chair of Mercer’s DB Policy Group, said: “This is great news for both pension schemes and company sponsors with yet another reduction in the pension gap, but we must not be complacent. Market swings could dramatically reverse these improvements and have done so in the past.”

FTSE100 firms nearly in black

Another index is produced each month by consultancy JLT Employee Benefits.

The JLT index shows the combined shortfall for FTSE100 companies was £4 billion in May – down from £15 billion the month before.

Charles Cowling, director at JLT Employee Benefits, said: “Markets continue to be positive for pension schemes and overall reported pension deficits are showing a strong improvement from 12 months ago.

“However, crucial for pension schemes, is the outlook for interest rates.”

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