Defined Benefit Pension Deficits Hit £111bn for UK Blue Chip Firms

The UK's biggest businesses have seen their defined benefit pension scheme deficits hit a new all-time-high of £111bn in April, despite asset values growing by £4bn.

According to research from Mercer's Pensions Risk Survey, the estimated aggregate IAS19 deficit for the DB schemes of FTSE350 companies stood at £111bn ($188bn, €135bn) (equivalent to a funding ratio – assets against liabilities – of 84%) at 30 April 2014 compared to £102bn (equivalent to a funding ratio of 85%) at 31 March 2014.

The study found that asset values stood at £575bn at 30 April 2014, representing an increase of £4bn compared to the corresponding figure of £571bn as at 31 March 2014.

The research also revealed that liability values stood at £686bn at 30 April, representing an increase of £13bn compared to the corresponding figure at 31 March 2014.

In comparison, pension scheme deficits stood at £96bn corresponding to a funding ratio of 85% at 31 December 2013.

"It is disappointing that despite more than a 3% increase in the FTSE100 over April, pension scheme deficits still increased so significantly," said Ali Tayyebi, Senior Partner in Mercer's Retirement Business.

"The driving factor was a significant increase in liability values which in turn resulted from a small reduction in long dated corporate bond yields, combined with a small increase in the market's expectations for long term inflation.

The Office for National Statistics (ONS) said UK companies contributed £63bn to UK pension schemes in 2010, and will likely have seen further increases since 2010, up from £25bn in 2000.