The FTSE350 pensions turning point: 2018

After a number of difficult years, let’s hope that 2017 is seen as the turning point for the defined benefit (DB) pension schemes of the UK’s largest public companies.

Although contributions to pay down DB scheme deficits are on the increase, companies appear to be in a healthier position to deal with this based on the increase in free cashflow over the period.

With equities performing strongly and bond yields having a quiet year, the funding position improved for many of the FTSE350 DB schemes. Overall, the aggregate IAS19 deficit for companies in the FTSE350 reduced from £62bn in 2016 to £55bn in 2017.

While this is all good news, it would not take much to tip the balance the other way. Our analysis suggests that a 0.5% fall in bond yields in 2017 would have pushed the aggregate deficit of the FTSE350 DB schemes up to £85bn.