Tags: UK | Pension | Shortfall

FT: UK Pension Shortfall Nearly Doubles

By    |   Thursday, 13 Oct 2011 08:25 AM

The aggregate shortfall of U.K. corporate pension schemes soared in September and is now at its second-highest level, The Financial Times reports.

The U.K.’s Pension Protection Fund (PPF) — the safety net for underfunded pension schemes at insolvent employers — said the aggregate deficit of all schemes soared to 196.4 billion British pounds ($307.94 billion) at the end of last month, from 117.5 billion pounds at the end of August, the Times reported.

It is not far off the record 208.6 billion pound shortfall in March 2009, at the depth of the recession, the Times added.

The BBC blames the shortfalls on the markets.

The FTSE all-share index fell by 6.1% during September, the BBC pointed out.

The Times also noted that over the year, the yield - or return - from U.K. government bonds has also reduced. As a result, this inflated the cost of paying for pensions in the future.

The impact that the market has on pension schemes is raising concerns about the Bank of England's quantitative easing efforts, which involves purchasing 75 billion pounds in gilts by February. The National Association of Pension Funds (NAPF) is among those who warn that this move will likely depress bond yields, causing the costs of pensions schemes to rise thereby increasing the shortfall even more.

Though August saw pension schemes slide into the red and September saw the decline worsen, Joanne Segars, NAPF chief executive, attempted to dispel any panic that may be building.

“These figures are only a snapshot and do not reflect the long-term health of pension funds. Pension investments work over a long timeframe, and are well placed to smooth out market volatility,” she told BBC.

"Private sector workers in a final salary pension should not get too worried. The pension rights they have already banked are well protected, and will not be hit by weak market conditions,” she added.

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The aggregate shortfall of U.K. corporate pension schemes soared in September and is now at its second-highest level, The Financial Times reports. The U.K. s Pension Protection Fund (PPF) the safety net for underfunded pension schemes at insolvent employers said the...
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2011-25-13
Thursday, 13 Oct 2011 08:25 AM
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