Many schemes are reconsidering if it is the right time to secure liabilities with an insurer, as deficits decreased over the year, JLT Employee Benefits (JLTEB) has said.

Under the IAS19/ FRS178 accounting standard, JLTEB's research revealed that the deficit for all UK private sector defined benefit (DB) schemes decreased from £160bn in August 2012 to £117bn in August this year.

The deficit of FTSE 350 companies decreased over the year by £5bn to £61bn at the end of August this year, while the deficit remained at £57bn for FTSE 100 companies despite an increase in assets.

Charles Cowling, JLTEB director, said that deficits have reduced over the year because of "excellent" returns on growth assets and the impact of increases in corporate bond yields.

However, on a month by month basis the deficit for all UK private sector DB schemes actually increased by £45bn from £72bn at the end of July this year, due to higher liabilities and a lower value of assets.

Even so, Cowling said that schemes are reconsidering whether it is the right time to secure liabilities with an insurer.

But he warned: "Just as demand for bulk annuities is likely to start increasing, we are seeing participants in the market considering whether to withdraw – provoked by increased regulatory and capital requirements.

Cowling said that Goldman Sachs sold its majority holding in Rothesay Life and Legal & General completed its acquisition of Lucida at the end of August.

"A reduction in competition is an unwelcome development for pension schemes and companies that have plans to move towards buy-out," Cowling said.

"It highlights the importance of monitoring the annuity market to identify opportunities and being ready to seize these when they arise."

First published 03.09.2013

monique_simpson@wilmington.co.uk