FTSE 100 pension schemes in surplus for first time in a decade

After ten years of deficits, FTSE 100 pension schemes have moved into surplus, according to the most recent JLT Employee Benefits (JLT) monthly index.

The index revealed that at 31 July 2018, FTSE 100 companies reported a £3bn surplus in their pension schemes, compared to a year earlier when JLT revealed that the FTSE 100 was in a £34bn deficit.

Commenting on the finding, JLT chief actuary Charles Cowling said: “The latest move is still good news for all UK pension schemes. 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.”

However, Cowling also stated that this is the “overall” picture, with some individual companies and their pension schemes showing different positions.

The JLT actuary believes that much will depend on tomorrow’s Monetary Policy Committee meeting at the Bank of England, with many city experts predicting an interest rate rise, which pension schemes have been “hoping to see for most of the last ten years”.

“In combination, these factors may present an ideal opportunity for pension schemes to lock in their position and switch out of risky assets into investments that more closely match their liabilities. Having spent 10 years clawing their way back into surplus, it would be a very sad day for pension schemes if all that progress was lost in another crisis of confidence in markets,” he added.

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