Deficit in UK pension schemes widens to a record £312.1 billion
The deficit in UK pension schemes hit a record high of £312.1bn in May, the Pension Protection Fund (PPF) reported yesterday.
It is the highest deficit since PPF records began in 2003 and climbed almost £100bn over the month.
In fact, since the £24.5bn shortfall reported in May 2011, the deficit has soared 1,274 per cent. This means that the 6,432 final-salary schemes tracked by the PPF have only 76.8 per cent of the assets they need to pay out to pensioner members, down from 82.6 per cent in April.
The PPF blamed the rise on shrinking gilt yields.
"Over the month, 15-year gilt yields fell by 55 basis points, which resulted in liabilities increasing by 7.6 per cent," it said.
Tom McPhail, head of pensions research at Hargreaves Lansdown echoed that.
"The numbers look extreme but this is a consequence of the unusually low gilt yields we are currently experiencing," he said. "It is reasonable to expect that the yields — and therefore the deficits — will head back in the opposite direction at some point."
But he warned that the longer it takes, the more pressure will build on the regulator and employers to take corrective action by increasing employer contribution rates.
Ros Altmann, director general of Saga, said the situation is a result of the Bank of England's quantitative easing policy.
"QE is a disaster for company pension funds since the more the Bank prints new money to buy gilts, the worse pension deficits become," she said.
"It seems of great concern that the Bank has persisted in buying gilts and worsening pension deficits. This is clearly damaging the UK pension system since both company and private pensions in the UK are underpinned by gilts," Ms Altmann added.
Joanne Segars, chief executive of the National Association of Pension Funds, warned: "Cash-strapped businesses that are already struggling to keep pensions going will have to find more assets to fill in the deficits."
- 1 President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
- 2 Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
- 3 The 'Black Museum': After 150 years, public set to see exhibits from police’s grisly crime museum
- 4 Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations
- 5 Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
President of Argentina adopts Jewish godson to 'stop him turning into a werewolf'
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing
Syrian teenager Usaid Barho reveals how he escaped from Isis using a suicide vest
Sir Winston Churchill’s family begged him not to convert to Islam, letter reveals
UK weather: 'Coldest night of the year' tonight as freezing temperatures plummet to -10C
Millions of Britons struggling to feed themselves and facing malnourishment
British actor Idris Elba cannot star as James Bond because he is black, says shock jock Rush Limbaugh
Ukip member gets into Christmas spirit with Union Flag plea to Santa 'for our country back'
Germany anti-Islam protests: 17,000 march on Dresden against 'Islamification of the West'
Nigel Farage: Ukip leader named 'Briton of the year' by The Times
Douglas Carswell tells Ukip to stop blaming foreigners as youth poll shows Nigel Farage is even less popular than Nick Clegg
iJobs Money & Business
Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...
Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...
Not specified: Selby Jennings: SVP Model Validation This top tiered investment...
Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...