Surge in liabilities as Bank buys government bonds

Pension liabilities among British businesses swelled to a record £255.2bn in December as the Bank of England waded into the market to buy government bonds, the latest figures from the Pension Protection Fund revealed yesterday.

The PPF, set up in 2004 to compensate pensioners when employers go bust, reported a £33.1bn rise in deficits among the 6,533 schemes it covers.

The chief culprit behind the surge was falling yields on government bonds as gilt prices rose. This was encouraged by the Bank's latest burst of quantitative easing which sees it buying gilts in an attempt to bring down long-term interest rates.

Investors also moved cash into UK bonds as the eurozone's turmoil lingered on.

Citigroup's analyst Michael Saunders said: "The rise in pension deficits will add to the mood of caution among businesses."