Belfast Telegraph

Private pensions hit record deficit levels of £222bn

By Vicky Shaw

Private sector final salary pension schemes are facing a record deficit of £222.1 billion, figures from the Pension Protection Fund (PPF) show.

The total deficit of 6,533 schemes is estimated to have increased by around £64bn since the end of October to reach the new figure at the end of last month.

The position has worsened on the previous year, when a total deficit of £1 billion was recorded at the end of November 2010, the report said.

The latest figure is the largest deficit since the records began in March 2003, but the PPF cautioned that direct comparisons are affected by changes made to its calculations from April this year which had the effect of raising liabilities.

Overall, the number of schemes in deficit at the end of November 2011 increased to 5,390, representing 82.5% of the total schemes, up from 5,175 schemes in deficit at the end of the previous month.

The number of schemes in surplus went down to 1,143 — or 17.5% of schemes — at the end of last month from 1,358 schemes in surplus at the end of October.

The funding ratio, which calculates schemes' assets as a percentage of their liabilities, fell over the month from 86.3% to 81.9% at the end of November.

Joanne Segars, chief executive of the National Association of Pension Funds, said quantitative easing had worsened the situation.

“A hike in liabilities has sent many pension funds deeper into the red,” she said.

“Gilts are important in the financing of pension funds, but the yields they offer are damaged by quantitative easing. The latest round of £75bn will only have made things worse.

“The PPF figures are only a snapshot and can vary greatly. This does not reflect the long-term health of pension funds, which work over a long timeframe and are well placed to smooth out market volatility.

“Private sector workers in a final salary scheme should not get too worried by these figures.

“The pensions regulator must help pension funds deal with quantitative easing by giving them some breathing space.”

5,390

Total of private pension schemes in deficit at the end of November 2011

Belfast Telegraph

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