Over half the value of Britain’s troublesome pension shortfalls has been wiped away in just one month, according to figures released today.
The aggregate deficits of more than 5,500 retirement funds compiled by Britain’s pension lifeboat fell from £103.8bn to £51bn between the end of December and January.
The value of pension payouts dropped by over £66bn with asset pots funding them worth only £14bn lower, the Pension Protection Fund (PPF) said.
Deficits are at their lowest level since May 2014. The last time the PPF calculated an aggregate surplus was April 2011.
Rising bond yields were the main cause for payout values dropping. The total future value of retirement obligations is calculated by using such yields. A higher yield will more heavily discount future payouts and reduce liabilities.
“Both bond and equity markets were fast out of the blocks at the start of this year,” said Blackrock head of UK strategic clients Andy Tunningley.
The funding level improvement would have been much greater had the upward trajectory of equity markets not given way to a severe bout of volatility at month end.
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Retirement fund deficits were thrown back into the limelight in mid-January as Britain’s second-biggest contractor Carillion failed under the weight of a crippling £1.5bn debt pile that included a £600m pension black hole.
Meanwhile, Royal Mail suffered a savage 2017 amid the threat of industrial action after deciding to shut its pension scheme. The postal giant said meeting retirement obligations would otherwise cost the firm more than £1bn a year.
BT is limbering up for its own battle with workers after plotting changes to its pension scheme amid concerns its deficit could have grown to £14bn.
And a GKN takeover approach from Melrose has been complicated by the fact the firm has a £1bn-plus retirement shortfall.