£310bn could be wiped off UK pension deficit by life expectancy changes - PwC

New figures released today from PwC’s Skyval Index show the deficit of defined benefit (DB) pension funds stood at £530 billion at the end of April 2017, a £30 billion increase since last month.

However, latest life expectancy analysis - from the Continuous Mortality Investigation (CMI) - shows that we are no longer seeing the same rates of improvement in life expectancy experienced at the start of the 21st century, and which underpin many pension scheme deficit forecasts. If the more recent trend continues, £310 billion could be wiped off the aggregate £530 billion pension deficit, leaving £220 billion.

Furthermore, pension fund assets would need to grow by an extra 1 per cent a year more than currently assumed in deficit calculations, for the next 20 years, to cover the remaining £220 billion deficit without needing company cash contributions.

PwC’s Skyval Index, based on the Skyval platform used by pension funds, provides an aggregate health check of the UK’s c.5,800 DB pension funds.

The current Skyval Index figures are:

Assets

Liability target

Deficit

Deficit change since last month

Funding measure (current)

£1,530bn

£2,060bn

£530bn

£30bn increase

Funding measure adjusted for reduced life expectancy projections

£1,530bn

£1,750bn

£220bn