Over 70% of UK defined benefit (DB) pension schemes are cashflow negative, with more benefits being paid out than contributions being received, while in Europe as a whole the figure stands at 64%.

In the UK, this marks an increase of cashflow-negative DB plans of 7% since 2018. The key driver behind this year-on-year increase is the maturity of these plans, with many now being closed both to new members and new benefit increases.

Throughout Europe, including the UK, 72% of DB pension schemes expect to become cashflow negative within the next ten years, according to the latest asset allocation survey by pensions and investment consultancy firm Mercer.

“Whilst a normal scenario for a DB scheme approaching maturity, being cashflow negative presents some specific challenges as assets need to be properly managed in order to meet cashflow and collateral needs,” the report stated.

Disinvesting assets remained the most common method to meet cashflow requirements amongst 91% of respondents – yet this year has also seen increases in alternative ways to meet liabilities.

Nearly 50% of respondents now leverage investment managers to distribute income from investments. Back in 2018, 43% employed this tactic.

“While 2019 has so far been marked by cautious optimism, investors need to be very aware of an ever-evolving macro-economic and political backdrop,” said Mercer’s chief investment officer in the UK, Jo Holden.

Read more: @Funds Europe