UK pension funding volatile over first quarter of 2020 according to PwC’s Skyval Index but long-term view is needed

Apr 02, 2020

New figures released today from PwC’s Skyval Index show the deficit of defined benefit (DB) pension funds stood at £290bn at the end of March.  

While this is a significant increase from £170bn at the start of the year, it still has not reached the levels seen in late summer of 2019 and is close to being back to where it was at the start of 2019.

The first quarter of 2020 also highlights the inherent volatility in the measurement of pension funding.  While the deficit has increased month on month, the drivers for this have been different. In January, lower yields pushed the liability measure up to £2 trillion but assets were also high, offsetting some of the impact. Since then, sparked by COVID-19 and global trade concerns, asset values have fallen significantly but long-term real interest rates have also ticked up, offsetting the liability impact.

PwC’s Skyval Index is based on the Skyval platform used by pension funds and provides an aggregate health check of the UK’s 5,000+ corporate DB schemes.  From February the data reflects the latest Pension Protection Fund universe, which showed the number of UK pension funds has declined by almost 100 over the last year.  This is due to, for example, insurance buy-outs and PPF transfers, which means the deficit is a little lower than it would otherwise have been.

Latest Skyval Index figures, based on the 'gilts plus' method widely used by scheme actuaries, are:


Assets (£bn)    




December 2019       




January 2020




February 2020




March 2020





Steven Dicker, PwC’s chief actuary, said: 

“Deficits have increased over the quarter but we’ve been here before; only around six months ago in fact. The key is not to overreact to short-term market movements - managing pensions requires a long-term view.

“COVID-19 is clearly a significant factor and throws up a range of things that those responsible for DB pensions need to manage including, most importantly, ensuring that payments keep flowing to the 10 million people currently receiving pensions.

“The Pensions Regulator (TPR) has demonstrated a pragmatic approach, opening up the possibility of stressed scheme sponsors deferring the contributions they are making to clear deficits for a period, to manage cashflow and help ensure they will be there to support schemes in the long-term. TPR has also suggested that many funding valuations that are in progress can be completed without needing to revisit all the work done over the last 12 months simply because of the current market conditions.

“For those who remain in a strong funding position, where they were well hedged and had significantly de-risked their assets, there may well be attractive options available to them, for example, in the insurance buy-out market or in locking in hedging gains.”


Notes to editors

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, follow @SkyvalOnline or connect on LinkedIn

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Richard Pain

Richard Pain

Manager, media relations, PwC United Kingdom

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