UK Pension Fund Deficit Falls To £500bn, According To PwC’s Skyval Index

New figures released today from PwC’s Skyval Index show the deficit of defined benefit (DB) pension funds stood at £500bn at the end of March 2017, a £20bn decrease since last month.

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:
The funding measure is the approach used by pension fund trustees to determine company cash contributions (see notes to editor for definitions on deficit measures).

Steven Dicker, PwC’s chief actuary, said:
‘Despite only small market movements over the last month, the overall deficit has fallen by £20bn to £500bn. This was mainly due to a decrease in assumed inflation, reflecting movement in the published yields often used to set this assumption. This highlights how sensitive measurement of pension liabilities is to even modest changes. It can also be counterintuitive, as inflation is expected to rise further. Now the Brexit process has officially started, pension schemes face two years of uncertainty and potentially volatile deficits.

This only adds to the challenge of long-term planning, especially when using a market ‘snapshot’ approach for actuarial valuations. Many schemes will be considering alternatives to the traditional ‘gilts plus’ approach to try to get a clearer picture of their liabilities.’

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