Pension shortfalls shrink as equity market recovers

THE deficits sustained by the UK’s 7,400 private final salary pension schemes have dramatically improved on the back of rising equity markets and bond yields.

Their collective shortfall shrank 65 per cent from £93bn to £33bn in December, according to the government’s Pension Protection Fund (PPF). The figures mark significant progress from the £191bn gap recorded this time a year ago and will dampen fears that Britain’s private sector is sleepwalking into a pensions crisis.

The emergence of uncontrollable funding holes has led as many as 90 per cent of employers to shut their final salary schemes to new entrants. In some cases – as with British Airways – a company’s market capitalisation is dwarfed by the size of its deficit. The PPF said: “Higher bond yields resulted in a 4.1 per cent decrease in liabilities while stronger equity prices increased assets by 11.7 per cent.”