We have recently released the 2018 version of our annual survey of the pension liabilities of FTSE 350 companies. You can find the full report here on our website.
In our last blog post, we already talked about some of the early findings from our analysis – companies adopting the latest mortality projections and changing their approach to deriving the discount rate, and the extra £20bn of benefit payments in 2017 compared to 2016. As well as these issues, our report looks in detail at the improvement in funding levels seen over 2017, the assumptions adopted at 31 December 2017 and discusses some of the current and future issues in defined benefit pensions.
One of the key findings was that 35% of FTSE 350 pension schemes had an accounting surplus at 31 December 2017, and 80% of those in deficit could have the deficit cleared with the equivalent of less than two years of dividend payments. But as you can see from the Pension Deficit Index, the aggregate position of the FTSE 350 pension schemes has improved from a deficit of £35bn at 31 December 2017 to a deficit of £3bn at the end of August. If we look at just the FTSE 100 pension schemes there is a £1bn surplus.
The improvement in funding positions over the last 12 to 18 months has many sponsors turning their attention away from accounting deficits and towards opportunities to secure their liabilities with an insurer. At 31 December 2017 around 10% of FTSE 350 companies had DB pension schemes that were at least 90% of the way to having enough money to buy out all of their liabilities with an insurer. Improvements in funding over 2018 to date will have seen that percentage increase.