A threefold increase in the pension scheme deficits of FTSE 350 companies comes as consultants expect more trustees, including those of smaller pension schemes, to de-risk as prices fall.

Willis Towers Watson, a pensions advisory firm, predicts that more interest from smaller schemes will help drive an aggregate £30 billion of pensions liabilities to be insured this year, through buy-ins, buyouts and longevity swaps.

This would be a significant year-on-year increase in the level of pensions de-risking in the UK, said the firm, returning to the levels seen in 2014 when £39 billion of liabilities were de-risked. After that year activity fell to £18 billion in 2015 and £11 billion last year.

Last year’s fall was blamed on the “bedding-in” of Solvency II and the Brexit vote.

Shelly Beard, director in Willis Towers Watson’s de-risking team, said: “2016 was very much a year for taking stock, with uncertainty following the UK’s EU referendum certainly subduing the overall level of activity taking place.”

Beard said that activity picked up markedly in the second half of 2016 after insurers focused on their Solvency II capital positions and other issues, and therefore providers are entering the New Year with “strong pipelines”. Several deals are expected to trade in January, and “more of our clients are approaching the market than ever”, added Beard.

An overall increase in the regularity and volume of longevity risk that can be passed into the reinsurance market is allowing smaller schemes to be more active in the market for hedging longevity. The scheme are able to benefit from “big scheme” pricing, making longevity hedging programmes more attractive.

It was Mercer, another corporate pensions consulting firm, which calculated the threefold increase in FTSE 350 defined benefit pension liabilities. The Mercer Pensions Risk Survey shows that deficits increased from £39 billion at the end of 2015, to £137 billion on December 30, 2016, after corporate bond yields fell by more than 100 basis points over the year, causing liabilities on companies’ balance sheets to increase.

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