One week on from President Trump’s inauguration the total UK pension deficit* reached its lowest level since before the EU referendum at £790bn. However, KPMG has found that two months to the day since Trump took office on 26 January, falling gilt yields have led to a dramatic increase in UK pension liabilities, with the total deficit now standing at £865bn.**
Commenting, Tom Seecharan, Pensions Director, KPMG said:
“In the two months since Donald Trump was sworn in as 45th President of the United States, UK pension liabilities have increased by a staggering £125bn. It remains to be seen whether the ‘Trump Bounce’ might turn into a ‘Trump Thump’ but whatever the geopolitical and economic causes, this highlights the volatility which still remains.
“Improvements in market conditions since the 8 November election had benefitted schemes to the tune of £120bn as markets priced in potential increases in interest rates and stock markets around the world. Unfortunately over 70% of these gains have been lost in the last two months as some of this optimism has receded.
“This should certainly add impetus to any plans for UK sponsors looking to take risk out of their pension schemes at rates which still represent a marked improvement versus the conditions in September 2016, when the combined deficit had reached £1,130bn.”
This analysis was done using KPMG Fusion, an online pension risk management tool.
*On a buyout basis
** This takes into account assets which increased by £50bn in the same timeframe.
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