Experts reacted to the contention from the Bank of England that lower yields had a "relatively limited" effect on pension scheme deficits.
The minutes of the MPC played down the impact of ballooning pension deficits – despite the trend continuing as yields fell after last week's interest rate cut.
"Lower yields posed potential risks to some aspects of the functioning of the financial system, for example by increasing the deficits of many pension funds and through their effects on the business models of insurers. At present, however, those effects appeared to be relatively limited," it was detailed in the minutes.
However, such an opinion was not shared by some experts.
“By my calculations, there is not enough UK interest rate duration to allow defined benefit pension funds to match their actuarially-estimated liabilities with fixed income assets, despite regulatory incentives to so do.
Put another way, pension funds are collectively short long-dated gilts and, in reinitiating it’s QE programme, the Bank has found itself delivering a short-squeeze – the effect of which is to increase pension fund deficits further," said Toby Nangle of Columbia Threadneedle Investments.
Yesterday former pensions minister Baroness Altmann said that the danger of this would be to push more schemes "over the edge" and Nangle was also pessimistic.
"The Bank indicated, that despite fluctuations in pension deficits, schemes have kept overall contributions broadly stable over recent decades and have the ability to maintain current levels of contributions and extend the period over which they bring them back to balance. This assertion looks likely to be tested," he said.
Ultra-low yields – which have been unpinned by the interest rate cut – have driven pension scheme liabilities up in recent months in particular. As asset values fail to keep up, scheme deficits have grown.
Faced with the prospect of cash top-ups to bridge the deficits, the likes of Royal Mail are being forced into making tough decisions.