Bank pumps £370m into its pension

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The Bank of England is to inject more than £370m into its pension fund over the next decade, it said yesterday after it emerged that the fund had swung from surplus into deficit.

Its annual report showed an independent valuation carried out every three years showed the fund's position had fallen dramatically from a £150 surplus in 2002 to a £299m deficit last year.

The Bank said the health of the fund had been hit by the fall in long-term bond yields and the improvements in pensioners' longevity, which has increased the scheme's liabilities.

It said it would pay £52.5m a year over the next four years followed by six payments of £26.7m. The total of £370m, which includes interest payments on the deficit, will come out of the Bank's reserves. "We have a large actual deficit and we are going to pay it off over a period of 10 years," a spokesman said. "All these factors have made pensions much more expensive."

The report showed that the required contribution rate into the fund had risen from 24 per cent pensionable earnings in 2005 to 41 per cent this year.

The spokesman said the Bank was unusual among public bodies in being so transparent about its pensions arrangements.

The report also showed the Bank had successfully exploited the surge in bond prices. It raised the share of bonds in its portfolio from 35.0 to 39.3 per cent between 2005 and 2006, while the value of that holding surged 33 per cent to £749m. Its equities portfolio jumped almost 10 per cent to £999m.

The total value of the fund rose 19 per cent to £1.91bn but the latest assumptions on longevity expected the likely rate of return to 5.8 from 6.7 per cent.

Three gangs making 90% of counterfeit bank notes

Three criminal gangs dominate production of counterfeit bank notes, which surged by more than 50 per cent last year, the Bank of England said yesterday.

About 505,000 fake notes were taken out of circulation in 2005, 53 per cent more than the previous year and the highest for more than four years.

According to the figures, which were published in the Bank's annual report, the face value rose to £10m from £6m in each of the previous three years. "Based on technical analysis of all counterfeits taken out of circulation the Bank believes three sources accounted for almost 90 per cent of the total taken out of circulation last year," the report said. "This indicates the presence of serious organised crime in banknote counterfeiting."

A spokesman said the volume of counterfeiting was very low as a share of total circulation and said the increase did not represent a weakness in the design. "It would appear that serious organised crime is involved and so perhaps it is on a larger scale than before," he said.

The majority of the notes involved were £20 bills. The Bank said that printing technology had moved on "leaps and bounds since the days of Dixon of Dock Green".

The Bank said it was working closely with De La Rue, its printer, to ensure high quality of notes, and with law enforcement agencies to improve detection.

Philip Thornton