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Final salary pension deficits hit new high

Final salary pension deficits hit new high

Category: Pensions

Updated: 05/10/2012
First Published: 12/06/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The deficit of the UK 's final salary pension scheme has hit a new high, according to the Pension Protection Fund (PPF).

The overall deficit of the 6,432 defined benefit (DB) pension schemes reached £312 billion in May – the highest total recorded since records began in 2003.

The collective shortfall increased by £95 billion in May alone, from £216 billion in April, said the PPF.

At the same point last year, the deficit of DB schemes in the UK was £24.5 billion.

Total assets held in the 6,000 plus pension schemes have risen from £990 billion to £1,030.8 billion in the last 12 months.

However, liabilities held by the schemes have increased even more sharply, up to £1,343 billion.

The PPF said that the returns from Government bonds and the financial markets were the main drivers for these trends.

"Over the month, 15-year gilt yields fell by 55 basis points, which resulted in liabilities increasing by 7.6%," it said.

"Over the year to May 2012, 15-year gilt yields were down by 173 basis points and the FTSE All Share Index fell by 11.3%."

The number of schemes in deficit at the end of May increased to 5,503 – representing more than 85% of all DB schemes – with only 929 in surplus.

"This is a big leap further into the red for private sector final salary pension funds, and it reflects the immense pressure they are under," said Joanne Segars, chief executive of the National Association of Pension Funds.

"Cash-strapped businesses that are already struggling to keep these pensions going will have to find more assets to fill in the deficits."

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