Pension Funding Deficits at UK-Listed Companies Hit £67 Billion as Yields Drop

September 12, 2019 | Alternative Investments

Pension funding deficits at defined benefit pension plans for the top 350 listed companies in the UK touched a two-year high in August

Pension funding deficits continue to balloon this year. According to consulting firm Mercer, funding deficits at these pensions bloated by £16 billion to £67 billion as of August 30 from £51 billion in July.

As a result, funding level dropped from 94% in July to 93% in August.

This was the second consecutive month in which the deficit has risen.

Reduction in corporate bond yields the culprit

The increase in deficit was largely on account of a decline in corporate bond yields, said Maria Johannessen, a partner at Mercer.

Charles Cowling, actuary, warned that schemes faced substantial risk from falling interest rates as well as political volatility from Brexit.

Cowling also warned of President Trump’s increasing pressure on the Fed to cut rates more aggressively.

Across the pond

In the United States, funding deficits at the hundred largest US corporate pension plans zoomed to $306 billion in August.

According to actuarial and consulting firm, Milliman, the funded ratio fell to 83.8% from 87.7% in July.

The firm further attributed the burgeoning deficit to a sharp drop in benchmark corporate bond interest rates. Finally, increasing exposures to alternative investments may be one way to improve returns at these pension funds.

Free Industry News

Subscribe to our free newsletter for updates and news about alternatives investments.

  • This field is for validation purposes and should be left unchanged.

Alt Insights

January 16, 2020

ESG: Lately-turned Tesla Bull Jim Cramer Adds Fink To The Mix

ESG: Lately-turned Tesla Bull Jim Cramer Adds Fink To The Mix

Latest Alternative Investment News

Digital Assets: The Digital Dollar Foundation and Accenture Launch the Digital Dollar Project
January 17, 2020     Digital Assets, News

J. Christopher Giancarlo, former Chair of the Commodity Futures Trading Commission (CFTC), along with Charles Giancarlo and Daniel Gorfine, have joined hands with Accenture on the digital dollar, or US…

Digital Assets: In Reforms Push, China Mulling Rules for New Digital Banks, Including by Foreigners
January 17, 2020     Digital Assets, Regulations

China is working on guidelines for the establishment of online-only banks. Chinese regulators are pushing for the establishment of new, 100% digital banks to reduce risk in the country’s financial…

ESG: Cerulli Report Says 2020 To Be “Pivotal” For Retail ESG Investing
January 17, 2020     ESG and Sustainability, Special Reports

New regulations, products, and money will make 2020 a banner year for ESG in Europe Sustainable and responsible investing around the themes of Environment-Social-Governance (ESG) will come into its own…

The DailyAlts Playbook: Short Strategies for Tesla and Apple, where Ken Griffin was on Wednesday, Kyle Bass’ Hong Kong Worries, and the GAO’s Statement on Donald Trump
January 17, 2020     Investments, News, The DailyAlts Playbook

Today, the DailyAlts Playbook talks about short strategies for Tesla and Apple,  where Ken Griffin was on Wednesday, Kyle Bass’ Hong Kong worries, and the GAO’s statement on Donald Trump.