Private Pension Black Hole Expands To £312bn
The private sector's pension deficit black hole has expanded to an estimated £312bn, according to newly released Government figures.
The Pension Protection Fund (PPF) said the deficit of 6,432 schemes is believed to have jumped £95bn in May, amid ongoing economic uncertainty.
Pension campaign groups said the figures show the "immense pressure" final salary funds are under, creating further problems for cash-strapped businesses and workers.
The deficit is the largest since the records began in March 2003, although the PPF has cautioned that direct comparisons are affected by changes made to its calculations from April last year, which had the effect of raising liabilities.
The funding ratio, which records assets as a percentage of liabilities, stands at 77%, compared with 98% a year ago.
The PPF, established to pay compensation in case of insolvency or insufficient assets in company pension schemes, said that a reduction in the yield of government bonds was behind the figures.
The Bank of England's policy of quantitative easing (QE), injecting liquidity into the economy, has been blamed by pensions campaigners for the recent increases in deficits and for making pensioners worse off.
When they retire, workers use their pension pot to buy an annuity from an insurer, a decision which sets the size of their pension for life.
Annuity rates are linked to the yields on government bonds, called gilts, which have been dramatically reduced by QE.
National Association of Pension Funds chief executive Joanne Segars said: "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.
"Cash-strapped businesses that are already struggling to keep these pensions going will have to find more assets to fill in the deficits."
She added: "Quantitative easing and international investors seeking a safe harbour from the euro storm have contributed to a sharp drop in gilt yields.
"That gilt fall has fuelled this record deficit, which is more a reflection of accounting rules on pensions rather than any structural weakness."
Saga director general Ros Altmann, an expert on pension policy, said many firms are being forced to put more money into shoring up their pension schemes rather than into their business to create jobs.
She said: "These latest figures are further evidence of the damage done by the Bank of England's quantitative easing policy.
"QE is a disaster for company pension funds since the more the Bank prints new money to buy gilts the worse pension deficits become.
However, a spokesman for the Pensions Regulator, the UK watchdog for work-based pension schemes, said: "The regulator provides considerable flexibility for employers and schemes for addressing deficits.
"The majority of employers should be able to meet their promises to members without major adjustments to their current funding plans.
"We've consulted widely with the industry on these issues and will be focusing proactively on the most difficult cases."
what do you think?
McRuin ripped 20 billion tax relief p.a. out of private pensions 10 years ago, so that accounts for 240 billion, add in lost growth and interest and there's the 312 billion.
just what exactly did brown blair balls and friends spend our pensions on ? the millenium dome ? the illegal wars ? becketts gazebo ? I hope that those socialist sc****gs never get into power again. as for the public sector whinging about their pensions....tough. most of you have been supporting socialism, so what goes around comes around.
Pension Fund values go down because of a fall in the markets. And who do the idiots on here blame ? Labour and Gordon Brown. Just a few facts The change in tax relief was not introduced by Brown, but by Conservative Chancellor Norman Lamont. Brown just extended it. Brown raised 5 billion a year not 20 as gengis... pretends The Pension Fund's have had 12 years to adjust their contributions, so blaming something that happened then is pathetic, but then again, blaming Labour for everything is about the only consistent policy the Tories have. And finally, it's almost inevitable that Labour will be back in power in 3 years at most, given the disastrous policies of the current Government. As you say, What goes around comes around.