Pension funds doing better

The funding position of defined benefit pensions improved dramatically during December with 450 schemes clawing their way out of the red.

The collective deficit faced by the UK’s nearly 7,400 defined benefit schemes, including final salary pensions, more than halved during the month to 32.6bn, compared with 92.5bn at the end of November.

The improvement can be attributed to a sharp reduction in the value of the liabilities pension schemes faced during the month due to higher gilt yields, upon which future costs are based.

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The rise in gilt yields helped to reduce liabilities by 5.3 per cent during December alone, while they have fallen by 7.6 per cent during the whole of 2009.

At the same time, the assets held by pension schemes rose by 1.1 per cent during December and by 10.6 per cent during the past 12 months.

The figures were disclosed by the Pension Protection Fund.