Britain’s biggest companies are nearing the best position to fund pension schemes since before the financial crisis, following a sudden reversal of fortunes for UK corporate pension plans, a study out today shows.

Firms listed in the FTSE 350 are better placed to support their defined benefit pension schemes than at any time over the past seven years, according to the research from PwC.

The company said the Pensions Support Index, which tracks levels of support from FTSE 350 firms, rose by seven points to a score of 83 out of 100 for the second half of 2013.

The previous score of 76 – recorded in the first half of 2013 – held sway since December 2011, with little sign of an improvement. Now the index is closing in on the pre-recession index high of 88 scored in June 2007, with the seven point rise the biggest six-month rally since 2009.

PwC calculates the index by assessing a company’s net assets, operating profit, profit before tax, cash from operations and market capitalisation against their pension scheme obligations.

PwC pensions credit advisory leader Jonathon Land said: “It’s encouraging that the economic recovery is finally translating into improved company performance and more manageable pension deficits for FTSE350 companies. Given that the forecast for GDP remains strong, we anticipate this improvement to continue.”

Rising gilt yields – which are used to calculate pension scheme liabilities to pay their pensioners in future – have helped lower the deficit after hitting three per cent in December 2013, from a low of 1.4 per cent in July 2012.

Yet a minority of companies still suffer from poor funding levels, with the study suggesting 10 per cent of FTSE 350 firm have a score of under 50.

“These companies need to start taking action now in considering how to deal with this change,” PwC partner Julia Dickson said referring to changes in the Pension Protection Fund levy, which charges weaker schemes.

Source: City AM