Pension Fund Deficits Increase in May

According to the Pension Protection Fund (PPF), the collective deficit of the UK's private sector final-salary pension schemes worsened by more than £40 billion in May.

(June 8, 2010) — Figures released today reveal the deficit of Pension Protection Fund (PPF)-eligible defined benefit schemes widened to £41.5 billion at the end of May from a deficit of just £2 billion at the end of April. Yet, scheme funding is better than it was a year previously, when combined deficit stood at £179 billion.

The PPF said total scheme assets of the 7,300 defined benefit plans surveyed fell 1.9% month on month to £895.8 billion, but assets actually increased 15% during the year ending May 2010. The firm attributed the decline in assets partly to falling UK and global equities. Meanwhile, the study showed liabilities fell 2.2% over the year to £937.2 billion. Liabilities increased 2.4% over the month from £915.4 billion in April.

The number of schemes in deficit increased from 5,066 to 5,450, while just 1,892 reported a surplus.

Meanwhile, Aon Consulting’s Aon200 Index, which tracks the aggregate deficit of the 200 largest privately sponsored pension schemes, revealed the aggregate deficit of the pension scheme sample was actually reduced by £13.5 billion last month, the biggest improvement since June 2009. The firm attributed the fall in the deficit from £97.2 billion in April to £83.5 billion a month later to a reduction in long-term inflation expectations that offset asset losses from investments.

“Scheme managers will be praying the dream scenario of rising assets and falling liabilities is round the corner,” Sarah Abraham, consultant and actuary at Aon Consulting, said to “Until then, deficits look set to remain huge by historical standards.”

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