The FTSE 350 pension deficit has fallen by £4bn to £72bn in the first quarter of 2018, figures by Mercer show.

According to the firm’s Pension Risk Survey, published today, 5 April 2018, the first three months of 2018 achieved half of the total deficit reductions for 2017, when the gap fell by £8bn.

Despite this, asset valuations fell by £15bn to £766bn in the first quarter, offset by a £19bn liability fall and rising corporate bond yields. Funding level remained the same at 91 per cent.

Mercer partner and strategy advisor, Le Roy van Zyl, said: “The quarter saw very significant asset and liability swings, with recent declining asset valuations creating cause for concern.

“In response, we continue to see schemes opting for strategies that protect themselves from the most adverse outcomes, whilst retaining some upside potential.

“Experience is also emphasising the need to be able to react quickly to opportunities that may well be short lived.”

Mercer partners and defined benefit policy group chair, Alan Baker, added that the decline in asset valuations is a reminder of the “very real risks” facing pension schemes and urged trustees and sponsors to “ensure their exposure is in line with their risk appetite”.

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