UK: Record deficit for pension funds in red

The aggregate deficit of UK corporate pension schemes with a shortfall soared to a record at the end of December, according to one official measure, as the effects of falling interest rates – which cause liabilities to swell – overwhelmed the impact of higher stock markets.

The UK’s Pension Protection Fund said that at the end of December, its 7800 Index, which measures the assets and liabilities of UK schemes, showed a record shortfall for schemes in deficit of £277.1bn ($429.2bn), up from £246.7bn at the end of November 2011 and from £61.0bn at the end of December 2010.

The latest numbers have provoked the National Association of Pension Funds, a trade body representing employers who sponsor retirement funds, to underscore the need for funding rules to be applied flexibly.

Joanne Segars, NAPF chief executive, said: “This Index shows that pension funds are falling even further into the red, and businesses will be under more pressure to fill in the deficits.

 Financial Times