Welcome to the eleventh WTW report discussing the impact of defined benefit (DB) pension schemes on FTSE 350 company accounts.
Accounting positions – Improved accounting positions
Assumptions – Increases in discount rates and inflation, small reduction in life expectancy
Key trends – DB closure and de-risking continues, dividends return
The start of 2021 was overshadowed by the ongoing impact of COVID-19 and, with it, renewed economic uncertainty. However, the next few months saw a steady flow of positive news on the vaccine rollout, which led to improvements in asset markets that boosted funding positions. Throughout the remainder of 2021, the more positive outlook continued and by the end of 2021 accounting positions were displaying a strength not seen for over a decade, with an aggregate surplus of £32bn.
As a result, the percentage of FTSE 350 companies reporting a surplus on an accounting basis increased from 38% 2020 to 62% in 2021 and 94% had improved their accounting position over the year.
With surpluses now more common than deficits (on an accounting basis), the focus of many companies is likely to shift towards other liability measures, such as cash funding or buyout, as schemes continue to progress towards their long-term objectives.
|FTSE 350 DB pension scheme report 2022