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."
- 1 Fifty Shades of Grey trailer: First look at Jamie Dornan as Christian Grey
- 2 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 3 50 books for students to read this summer: From Ernest Hemingway to Gillian Flynn
- 4 Students offered grants if they tweet pro-Israeli propaganda
- 5 Israel has discovered that it's no longer so easy to get away with murder in the age of social media
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Arizona execution lasts two hours as killer Joseph Wood left 'snorting and gasping' for air
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: Massive rise in sale of British arms to Russia
iJobs Money & Business
£20000 - £25000 per annum + OTE £40,000: SThree: SThree Group have been well e...
£18000 - £25000 per annum + OTE £40,000: SThree: Huxley Associates are looking...
£20000 - £25000 per annum + OTE £40,000: SThree: Computer Futures has been est...
£300 - £350 per day: Orgtel: Job Title: Business Analyst Rate: £300 - £350 per...
Day In a Page
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village
A secluded seven-bedroom detached house with large private garden, £490,000
A three-bedroom cottage overlooking Sarratt village green with open fires and solid oak floors
A three-bedroom maisonette flat in a Grade I-listed, Georgian townhouse in a sought-after location
A one-bedroom apartment located within a private gated development, north of Turnham Green
Look forward to a brighter future at two-bedroom Sunny Cottages, ideal for Londoners looking to downsize
A three-bedroom red-brick cottage with outbuildings and pretty gardens, £200,000
This three-bedroom flat within a former textile factory spans the corner of the fourth floor and has a balcony
A charming four-bedroom Oxfordshire cottage with oak floors and chunky-beamed ceilings, £465,000
A beautiful one-bed flat in a sought-after portered block, with access to Norland Square communal gardens
A one-bedroom flat within a Sixties school conversion with high-spec design and open-plan kitchen, close to Lambeth North Tube, £435,000
A 17th century four-bedroom house, with open fireplaces, cellar and pool, £600,000
A three-bedroom, coach house with luxury open-plan living space and contemporary breakfast bar