FTSE 350 companies’ ability to support their defined benefit (DB) pension obligations has fallen for the first time in more than four years, according to research from PwC.
The PwC study concludes that the fall has been partly driven by continued wrangling over Europe’s finances.
PwC’s Pension Support Index shows a three point decrease since 2014 to 80 out of a possible score of 100, despite a period of improving company performance. The index tracks the ability of FTSE350 companies with DB pension schemes to meet their collective pension obligations, indicating the overall level of employer support available.
Jonathon Land, of PwC, said: “As the UK economy exited recession, we all thought that companies’ ability to support their DB pension obligations could only improve. However, the fall in long term gilt yields has countered the effect of the improvement in the economy. The recent announcement on deflation will add further complexity to this. This is having a real impact on negotiations between trustees and companies. A year ago companies were saying yields would rise and many trustees were sympathetic to the view that deficits did not need to be fully funded. Today trustees are saying the deficit has worsened, and it could get worse still.”