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Improvement in pension plan shortfall
The funding shortfall faced by defined benefit pension schemes eased slightly last month on the back of rising stock markets, figures showed.
The UK's 7,400 defined benefit pensions, including final salary ones, saw their funding black hole improve to 158.1bn at the end of last month, down from 200.1bn in June, according to pensions safety net the Pension Protection Fund.
The improvement was driven by a recovery in global equity markets, leading to a 3.8 per cent jump in the value of assets held by pension schemes.
Higher gilt yields also helped reduce the value of the liabilities schemes face, cutting them by 1.9 per cent during the month.
But despite the recent improvement, the value of pension schemes' assets has still fallen by 1.6 per cent during the past year, while schemes' liabilities have soared by 15.2 per cent during the same period.
As a result, pension schemes are in a far worse position than they were 12 months earlier, when their collective deficit stood at just 18.8bn.
Around 85 per cent of pension schemes are currently in deficit, after 196 schemes managed to return to having a funding surplus during July.
The ongoing funding problems faced by many pension schemes is expected to lead to an increasing trend among companies to close their final salary pensions to existing staff.
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Tuesday 22 May 2012
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