Pension fund deficit soars to record £312bn at British firms

THE PENSION deficits at Britain’s final salary schemes ballooned to a record £312bn last month as funds were hit by market swings and the effects of the Bank of England’s money printing scheme.

The cumulative deficit of the 6,432 defined benefit schemes jumped £95bn in May and increased by nearly 13 times from the £24.5bn level of a year earlier, said the Pension Protection Fund report.

“This is a big leap further into the red for private sector final salary pension funds and it reflects the immense pressure they are under,” said National Association of Pension Funds chief executive Joanne Segars.

In total the schemes have only 77 per cent of the assets currently needed to pay their pensioners.

The report showed 5,503 of the schemes are in deficit.

The Bank’s £325bn quantitative easing programme could cost Britain’s pension industry £270bn by driving down yields on gilts – a staple investment also used to calculate liabilities – making it more expensive to pay for future obligations, the NAPF estimates.

Over the last month 15-year gilt yields have fallen by 0.55 percentage points, which resulted in an increase in liabilities of 7.6 per cent, the PPF estimates.