Pension plans see drop in funds shortfall

The UK's nearly 7,400 defined benefit pensions, including final salary schemes, collectively had a deficit of 15.1bn at the end of February, down from 51.9bn in January, according to the Pension Protection Fund.

The improvement was driven by a 2.5 per cent jump in the value of assets held by pensions during the month due to rising UK and global equity markets.

At the same time, a rise in gilt yields led to a 2 per cent fall in the value of liabilities pension schemes face.

This combination of factors helped more than 300 pension schemes claw their way out of the red during the month, although 70.5 per cent of schemes still face a funding shortfall.

The funding position of pension schemes has improved vastly since February 2009, when the deficit stood at 204.7bn.

Rising equity markets have helped to boost the value of schemes' assets by 20.4 per cent during the past 12 months, while changes to gilt yields have reduced their liabilities by 2.2 per cent.

More significantly, a change to the actuarial assumptions used when calculating pension schemes' future costs knocked around 70bn off their funding shortfall when it was first introduced in October last year.