UK pension deficit remains at £460bn in September, according to PwC’s Skyval Index

Sep 29, 2017

New figures released today from PwC’s Skyval Index show the deficit of defined benefit (DB) pension funds remains at £460bn at the end of September 2017.

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 (current)

£1,520bn

£1,980bn

£460bn

No change

Steven Dicker, PwC’s chief actuary, said:

"Long-term real interest rates (interest rates relative to inflation) as measured by Government bond yields have increased over September, which has led to a £50bn reduction to liabilities since August month end. However, there was no impact on the deficit due to falling asset values over the month.

“The swing in the size of deficit from month to month is sensitive to small market movements, as demonstrated by the month to month volatility."

Ends.

Notes to editors

  • Steven Dicker, PwC’s chief actuary,  is available for interview - please contact Katherine Howbrook on 020 7212 2711/07595 609 737 or katherine.howbrook@pwc.com

Notes on deficit measures:

  • Funding measure: the target used by pension fund trustees to determine company cash contributions, calculated on a bespoke basis for each pension fund, agreed between the trustees and sponsor.

  • Figures provided have been estimated by PwC and Skyval based on publicly available data of UK defined benefit pension funds, including from the Pensions Protection Fund’s dataset.

  • Other pension deficit measures exist but are generally not meaningful for tracking the health of UK pension funds.  For example:

  • Accounting: the target value of liabilities shown in company accounts, based on formal accounting standards (such as IAS19) which typically assume asset returns in line with AA-rated corporate bond yields. Pension decision-makers should not rely on the accounting measure to inform their management decisions.  Accounting numbers are not designed to be tailored to individual pension fund circumstances.  Some commentators publish IAS19 tracking figures but they are not in isolation a good basis for understanding pension funding status, nor deciding the best future strategy for any given pension fund's assets and liabilities.

  • Buy-out: the value an insurer would typically place on the fund's liabilities, which depends on prevailing market terms for these kinds of transactions. It is a hypothetical scenario for all pension funds to buy out their total liabilities in one go, as there is not enough capital market capacity to support this. Some commentators cite the theoretical deficit on such a buy-out basis as in the region of £1trn, but, in practice, this is not a cost which could or would ever be incurred in this way.

About Skyval

Skyval is a pensions platform which trustees, sponsors and all advisers can use for their pension scheme, as a single and confidential tool for their scheme-specific funding, investment, analytics and benchmarking requirements.

The Skyval suite of modules includes Skyval Dashboard, Skyval Monitor, Skyval Choice, Skyval Optimiser, Skyval Accounting and Skyval Insure. Skyval helps pension schemes reduce costs, manage risks and make better decisions faster. Visit www.skyval.com, follow @SkyvalOnline or connect on LinkedIn

About PwC

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