Deepening pensions black hole 'will take 11 years to overcome'

Pensions watchdogs face being overwhelmed by pleas from cash-strapped companies for more time to pay off ballooning pension funding black holes, a study today warns.

The accountancy firm PricewaterhouseCoopers says the situation has deteriorated to such an alarming extent that the average time needed to fill a pension scheme's funding shortfall has soared to 11 years from just eight years a year ago.

Companies face a stark choice of pumping more cash into their pension schemes and accepting lower growth, or pleading with the Pensions Regulator for more time, the firm says.

PwC looked at 98 defined benefit pension schemes – which guarantee the pensions of members when they retire – for the research. More than 91 per cent of them had a funding deficit, or a mismatch between their assets and the liabilities they have to pay pensions for members.

More than half (57 per cent) also had a higher deficit than at their previous scheme valuation, despite their acting to increase their deficit repayment contributions.

The last time the situation was this bad was shortly after the financial crisis in 2009, when the average time needed to pay off deficits was calculated at nine years.

The crisis has been sparked by an unusual combination of low yields on government bonds due to quantitative easing from the Bank of England, eurozone difficulties and a torpid economy.

The situation is only likely to ease in the event of a return to more normal conditions in the economy, PwC warned. Pensions partner Jeremy May told The Independent: "This demonstrates the importance of getting the economy back on track. The best cure for Britain's pension funding shortfalls is economic growth."

Mr May added: "Many companies now face the stark choice of ploughing considerably more cash into their pension scheme, or being saddled with the debt for longer. In many cases, lack of cash availability means the decision is simple.

"Even if sponsors have access to cash, they are often choosing to reserve it to reinvest in their business and promote growth … rather than have it tied up in the pension scheme."

Mr May said the Pensions Regulator has shown willingness to listen to companies seeking longer to repay shortfalls, but that they would need to have "a clear justification to present".

The study also found that 79 per cent of pension sponsors with higher deficits had upped their pension contributions, whilst 43 per cent increased the length of recovery plans.

PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Voices
voices
Sport
Roger Federer is greeted by Michael Jordan following his victory over Marinko Matosevic
tennisRoger Federer gets Michael Jordan's applause following tweener shot in win over Marinko Matosevic
News
peopleJustin Bieber accuses paparazzi of acting 'recklessly' after car crash
Arts and Entertainment
Oppressive atmosphere: the cast of 'Tyrant'
tvIntroducing Tyrant, one of the most hotly anticipated dramas of the year
News
i100
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.

iJobs Job Widget
iJobs Money & Business

Client Services Executive / Account Executive - SW London

£23000 - £26000 per annum: Ashdown Group: Account Executive / Client Services ...

PA to CEO / Executive Secretary

£36000 - £38000 per annum: Ashdown Group: Executive PA to CEO & Executive Dire...

Generalist HR Administrator, Tunbridge Wells, Kent - £28,000.

£25000 - £28000 per annum: Ashdown Group: Generalist HR Administrator - Tunbri...

Senior C# Developer (.NET, C#, JMS, TDD, Web API, MVC, integrat

£45000 - £75000 per annum + benefits+bonus+package: Harrington Starr: Senior C...

Day In a Page

Kate Bush, Hammersmith Apollo music review: A preamble, then a coup de théâtre - and suddenly the long wait felt worth it

Kate Bush shows a voice untroubled by time

A preamble, then a coup de théâtre - and suddenly the long wait felt worth it
Robot sheepdog technology could be used to save people from burning buildings

The science of herding is cracked

Mathematical model would allow robots to be programmed to control crowds and save people from burning buildings
Tyrant: Is the world ready for a Middle Eastern 'Dallas'?

This tyrant doesn’t rule

It’s billed as a Middle Eastern ‘Dallas’, so why does Fox’s new drama have a white British star?
Rachael Lander interview: From strung out to playing strings

From strung out to playing strings

Award-winning cellist Rachael Lander’s career was almost destroyed by the alcohol she drank to fight stage fright. Now she’s playing with Elbow and Ellie Goulding
The science of saturated fat: A big fat surprise about nutrition?

A big fat surprise about nutrition?

The science linking saturated fats to heart disease and other health issues has never been sound. Nina Teicholz looks at how governments started advising incorrectly on diets
Emmys 2014 review: Can they genuinely compete with the Oscars

Can they genuinely compete with the Oscars?

The recent Emmy Awards are certainly glamorous, but they can't beat their movie cousins
On the road to nowhere: A Routemaster trip to remember

On the road to nowhere

A Routemaster trip to remember
Hotel India: Mumbai's Taj Mahal Palace leaves its darker days behind

Hotel India

Mumbai's Taj Mahal Palace leaves its darker days behind
10 best pencil cases

Back to school: 10 best pencil cases

Whether it’s their first day at school, uni or a new project, treat the student in your life to some smart stationery
Arsenal vs Besiktas Champions League qualifier: Gunners know battle with Turks is a season-defining fixture

Arsenal know battle with Besiktas is a season-defining fixture

Arsene Wenger admits his below-strength side will have to improve on last week’s show to pass tough test
Pete Jenson: Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought

Pete Jenson: A Different League

Athletic Bilbao’s locals-only transfer policy shows success does not need to be bought
This guitar riff has been voted greatest of all time

The Greatest Guitar Riff of all time

Whole Lotta Votes from Radio 2 listeners
Britain’s superstar ballerina

Britain’s superstar ballerina

Alicia Markova danced... every night of the week and twice on Saturdays
Berlin's Furrie invasion

Berlin's Furrie invasion

2000 fans attended Eurofeurence
‘It was a tidal wave of terror’

‘It was a tidal wave of terror’

Driven to the edge by postpartum psychosis