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Funding improvement for FTSE 100 pension schemes

After a decade of deficits, pension schemes for FTSE 100 companies have seen a shift to a surplus position of £3 billion in July, which is up from a £34 billion shortfall when compared to the same time last year (31 July 2017).

Charles Cowling, chief actuary at JLT Employee Benefits said, “After 10 years of deficits, finance directors may be celebrating as FTSE 100 pension schemes finally move into surplus.” He also said, “Despite an unsettled political backdrop, with Brexit looming, markets have continued to be favourable for pension schemes. Moreover, the improvements in life expectancy, which have added so much to pension scheme liabilities over the last 10 or 20 years, do indeed seem to be slowing. Of course, this is the overall picture and individual companies and their pension schemes may show different positions. That said, the latest move is still good news for all UK pension schemes”.

The low interest rates over the last 10 years have also been a considerable factor in producing large pension scheme deficits. As anticipated by experts, the interest rate announced by the Bank of England on 2 August increased from 0.5% to 0.75%. This may further impact the health of UK pension schemes.