£108bn gap opens up in pension funds

PENSION schemes run by some of Britain’s biggest companies are sitting on a cumulative funding gap of more than £100bn, as low bond yields crimp returns and send liabilities to record highs, estimates from Mercer showed on Monday.

By The Newsroom

Published 14th May 2013, 10:04 BST

According to the consultant’s latest Pensions Risk Survey, the aggregate deficit for defined benefit schemes sponsored by constituents of the FTSE 350 index stood at £108bn at April 30, compared with £89bn at end-March.

A drop in long-term inflation assumptions in April was not enough to offset the effect of the sustained fall in high-quality bond yields, which helped to push total liabilities up to £665bn from £641bn in March.

Repeated rounds of central bank easing have contributed to a sharp drop in the yield on Government gilts – a staple investment for pension funds – making it more expensive for funds to match income to liabilities.

Britain Government