New rules see fund surpluses take a dive

Pension funds saw their surpluses dive during April as the introduction of new accounting rules pushed them back towards being in the red.

The UK’s 6,533 defined benefit pensions, including final salary schemes, had a collective surplus of just £2.3bn at the end of April, down from one of £45.5bn in March, according to pensions safety net the Pension Protection Fund.

The steep fall was driven by the introduction of new accounting assumptions, including increased life expectancy for men, which accounted for 80 per cent of the drop.

Hide Ad
Hide Ad

The PPF said if the accounting assumptions had not been changed, pension funds would have ended the month £37.2bn in the black.

The deterioration in their accounting position came despite the fact that the total value of schemes’ assets rose by 1.5 per cent to £1.003 trillion during the month on the back of stock market gains.

But this was more than offset by a 6.1 per cent jump in the cost of the liabilities they face to £1.001 trillion, due to the new accounting standards and lower gilt yields.

Although pension schemes were collectively in surplus at the end of April, 63 per cent of funds had a deficit.