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Defined pension scheme shortfall 'passes £100bn'

The funding shortfall faced by the UK's biggest defined benefit pension schemes has broken through the £100 billion barrier for the first time, research said today.

The 200 biggest defined benefit pensions, including final salary schemes, have a collective deficit of £103 billion, according to Aon Consulting.

The group said the deficit, which stood at £88 billion at the end of November, has increased despite rising equity markets, as the cost of providing the pensions has also grown due to higher inflation.

Marcus Hurd, head of corporate solutions at Aon Consulting, said: "This is an unwelcome Christmas present for all of those with an interest in UK final salary pensions.

"Despite rising equity markets, the costs of providing those final salary pensions already promised has risen incommensurately. The aggregate deficit continues to rise and the pensions black hole is deepening.

"Companies and pension scheme trustees can no longer put off managing their risks."

The majority of defined benefit pension schemes have been closed to new members, with companies instead offering less generous defined contribution schemes, under which members shoulder the risk of investment volatility and increased life expectancy.

There is also a growing trend for defined benefit schemes to be shut to existing members as well, or for firms to take steps to reduce the benefits they offer, as they become increasingly expensive to run

Recent figures from the Pension Protection Fund showed that eight out of 10 defined benefit pension schemes faced a shortfall at the end of November, despite an improvement in their funding position during the month.