FTSE350 defined benefit (DB) pension deficits have remained steady around the £100bn level since September 2013, Mercer has said.

According to Mercer's pensions risk survey data, the estimated aggregate IAS19 deficit for FTSE350 DB schemes stood at £102bn at 31 March, which is the equivalent of a funding ratio of 85%.

This is compared to a deficit of £101bn, an equivalent to a funding ratio of 85%, at 28 February 2014 and a deficit of £96bn in 31 December 2013.

The FTSE350 asset values stood at £571bn, which represents a reduction of £1bn compared to £572bn in February 2014, while liability values stood at £673bn, which represents no change from February 2014.

Mercer head of DB risk in the UK Ali Tayyebi said: "Asset values fell only marginally during the month despite the immediate negative market reaction to events in Ukraine. This will have come as a relief to many companies with accounting year ends on 31 March 2014.

He added: "Deficits have now remained steady around the £100bn level since September 2013. This might suggest a more stable financial environment but not necessarily a helpful one for those employers looking for positive investment experience to help them make inroads into their pension scheme deficits."

Accounting deficits remained largely unchanged in comparison to March 2013, when it stood at £93bn, although the lack of improvement hides cash contributions made by FTSE350 companies, Tayyebi said.

Mercer's financial strategy group senior partner Adrian Hartshorn said: "Employers need to contend with the Chancellor's 19 March Budget announcement which creates a period of uncertainty on the options available to manage defined benefit pension liabilities in the longer-term.

Although most of the Budget's headlines related to the welcome news of increased flexibility for defined contribution schemes, the outcome of the consultation now taking place on the future of transfers from DB schemes to defined contribution (DC) arrangements could have a material impact on the ability of companies to manage risk in their defined benefit schemes, as well as the choice and flexibility afforded to the members of those schemes."

First published 04.04.2014

monique_simpson@wilmington.co.uk