UK pension fund deficit climbs to £520bn

PwC’s Skyval Index, based on the Skyval platform used by pension funds, provides an aggregate health check of the UK’s c.5,800 DB pension funds.

The current Skyval Index figures are:

Assets

Liability target

Deficit

Deficit change since last month

Funding measure

£1,520bn

£2,040bn

£520bn

£50bn increase

Funding measure without extended allowance for future longevity improvements

£1,520bn

£1,800bn

£280bn

£40bn increase

Accounting measure

£1,520bn

£1,890bn

£370bn

£50bn increase

The funding measure is the approach used by pension fund trustees to determine company cash contributions.

Raj Mody, PwC’s global head of pensions, said: “A decrease in long-term yields of around 0.1 per cent per annum since the end of January led to an increase in liability values, causing the overall deficit to climb to £520 billion. The deficit increase was offset to an extent by a £40 billion increase in asset values.

“The DWP pensions Green Paper released last week suggests there is no across-the-board systemic DB pension problem, and also suggests deficits are generally affordable. However, the Green Paper does not address fundamental questions about whether employers should be on the hook at all for deficits which have largely arisen due to external forces, including regulation. Given that, we expect a robust industry response wanting to develop concessions around inflation measures, for example, despite the challenges this presents for member expectations.”