Pensions funding shortfall stabilises

The funding shortfall faced by the UK's 200 biggest defined benefit pension schemes stabilised during February, figures showed today.

But consultancy firm Aon Consulting warned another round of quantitative easing by the Bank of England could push pension schemes deeper into the red.



The group found the 200 biggest defined benefit schemes, including final salary pensions, collectively faced a funding shortfall of £94 billion at the end of last month, down from £97 billion in January.



The deficit faced by schemes has remained broadly stable for the past four months, although it is still more than double the level it was at in February last year of £44.8 billion.



Marcus Hurd, head of corporate solutions at Aon Consulting, said: "While we are seeing levels of volatility for pension schemes beginning to decrease, there are certainly still dark clouds on the horizon.



"Quantitative easing tends to increase the price of Government bonds and so reduce their yield. This in turn forces up pension scheme liabilities and increases deficits.



"The perverse impact of quantitative easing is that while it should help the economy as a whole to recover, it also increases final salary pension scheme deficits, thereby putting additional pressure on the very companies it is trying to help."



He said many pension schemes that were valued in April last year, just after the initial phase of quantitative easing began, were still struggling to agree contribution levels with their sponsoring company in the light of the inflated deficits they faced at the time.



The group estimates that a 0.5% decrease in the gilt yield, which has been widely quoted as the impact of quantitative easing, adds around £50 billion to the collective funding shortfall faced by the UK's 200 biggest schemes, and around £100 billion to the deficit for all defined benefit schemes.



There is a growing trend for companies to close their defined benefit pension schemes, as they become increasingly expensive to offer due to investment volatility and increased life expectancy.



Recent research from the Association of Consulting Actuaries found nine out of 10 defined benefit schemes had been closed to new members, while 18% had been closed to existing ones as well.



Workers are instead being offered less generous defined contribution schemes, under which their employer only guarantees the amount they will pay into the pension, leaving individuals to shoulder all of the risk.



Meanwhile, the Association of Consulting Actuaries became the latest group to criticise the Government's plans to reduce tax-relief on pensions for people earning more than £130,000, saying it was "seriously flawed".



ACA chairman Keith Barton said: "We understand the desire to raise additional revenues in the current climate and that those on higher incomes must accept they will bear a higher proportion of the tax take.



But, he added: "It seems almost to have been designed to do maximum damage to ongoing pension provision - in direct opposition to the Government's stated policy of encouraging the retention of 'quality' schemes."

Independent Partners: 10 top tips for retirement. Get your free guide here

Life and Style
Social media users in Mexico who commented on cartel violence have been killed in the past
techTweets not showing up or loading this morning, users say
News
newsMcKamey Manor says 'there is no escape until the tour is completed'
Voices
Hunted: A stag lies dead on Jura, where David Cameron holidays and has himself stalked deer
voicesThe Scotland I know is becoming a playground for the rich
News
i100
PROMOTED VIDEO
News
people
Arts and Entertainment
Architect Frank Gehry is regarded by many as the most important architect of the modern era
arts + entsGehry has declared that 98 per cent of modern architecture is "s**t"
Sport
Luis Suarez and Lionel Messi during Barcelona training in August
footballPete Jenson co-ghost wrote Suarez’s autobiography and reveals how desperate he's been to return
Money
Welcome to tinsel town: retailers such as Selfridges will be Santa's little helpers this Christmas, working hard to persuade shoppers to stock up on gifts
news
Arts and Entertainment
Soul singer Sam Smith cleared up at the Mobo awards this week
newsSam Smith’s Mobo triumph is just the latest example of a trend
News
Laurence Easeman and Russell Brand
people
Sport
Fans of Dulwich Hamlet FC at their ground Champion Hill
footballFans are rejecting the £2,000 season tickets, officious stewarding, and airline-stadium sponsorship
News
Shami Chakrabarti
people
Arts and Entertainment
Benedict Cumberbatch has refused to deny his involvement in the upcoming new Star Wars film
filmBenedict Cumberbatch reignites Star Wars 7 rumours
Sport
football
News
news
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Compensation and Benefits Manager - Brentwood - Circa £60,000

    £60000 per annum: Ashdown Group: Compensation and Benefits Manager - Compensat...

    Data Analyst/Planning and Performance – Surrey – Up to £35k

    £30000 - £35000 Per Annum plus excellent benefits: Clearwater People Solutions...

    IT Systems Business Analyst - Watford - £28k + bonus + benefits

    £24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

    Markit EDM (CADIS) Developer

    £50000 - £90000 per annum + benefits: Ampersand Consulting LLP: Markit EDM (CA...

    Day In a Page

    Wilko Johnson, now the bad news: musician splits with manager after police investigate assault claims

    Wilko Johnson, now the bad news

    Former Dr Feelgood splits with manager after police investigate assault claims
    Mark Udall: The Democrat Senator with a fight on his hands ahead of the US midterm elections

    Mark Udall: The Democrat Senator with a fight on his hands

    The Senator for Colorado is for gay rights, for abortion rights – and in the Republicans’ sights as they threaten to take control of the Senate next month
    New discoveries show more contact between far-flung prehistoric humans than had been thought

    New discoveries show more contact between far-flung prehistoric humans than had been thought

    Evidence found of contact between Easter Islanders and South America
    Cerys Matthews reveals how her uncle taped 150 interviews for a biography of Dylan Thomas

    Cerys Matthews on Dylan Thomas

    The singer reveals how her uncle taped 150 interviews for a biography of the famous Welsh poet
    DIY is not fun and we've finally realised this as a nation

    Homebase closures: 'DIY is not fun'

    Homebase has announced the closure of one in four of its stores. Nick Harding, who never did know his awl from his elbow, is glad to see the back of DIY
    The Battle of the Five Armies: Air New Zealand releases new Hobbit-inspired in-flight video

    Air New Zealand's wizard in-flight video

    The airline has released a new Hobbit-inspired clip dubbed "The most epic safety video ever made"
    Pumpkin spice is the flavour of the month - but can you stomach the sweetness?

    Pumpkin spice is the flavour of the month

    The combination of cinnamon, clove, nutmeg (and no actual pumpkin), now flavours everything from lattes to cream cheese in the US
    11 best sonic skincare brushes

    11 best sonic skincare brushes

    Forget the flannel - take skincare to the next level by using your favourite cleanser with a sonic facial brush
    Paul Scholes column: I'm not worried about Manchester United's defence - Chelsea test can be the making of Phil Jones and Marcos Rojo

    Paul Scholes column

    I'm not worried about Manchester United's defence - Chelsea test can be the making of Jones and Rojo
    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    Frank Warren: Boxing has its problems but in all my time I've never seen a crooked fight

    While other sports are stalked by corruption, we are an easy target for the critics
    Jamie Roberts exclusive interview: 'I'm a man of my word – I'll stay in Paris'

    Jamie Roberts: 'I'm a man of my word – I'll stay in Paris'

    Wales centre says he’s not coming home but is looking to establish himself at Racing Métro
    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

    A crime that reveals London's dark heart

    How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
    Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

    Lost in translation: Western monikers

    Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
    Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

    Handy hacks that make life easier

    New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
    KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

    KidZania: It's a small world

    The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker