Defined Benefit pension schemes have £310 billion deficit

Pensioner with caneThe deficit of all UK defined benefit (DB) pension schemes has increased by £55 billion (€71.3 billion) in the space of a year, to £310 billion.

The most worrying statistic is for DB schemes of FTSE 100 companies, where the deficit in this sector has grown by £20 billion to reach £100 billion in the space of a year.

JLT Employee Benefits calculated the funding position of all UK private sector DB pension schemes under the industry standard accounting measure (IAS19), which is used in company reports and accounts.

Charles Cowling, director at JLT, said that conditions were getting ever more challenging for pension schemes because of low interest rates and uncertainty in markets ahead of the EU referendum.

“The government is currently consulting on the possibility of allowing benefits to be reduced in extreme circumstances, but this is unlikely to help most hard-pressed companies which can’t seem to keep deficits from spiraling despite pumping ever more cash into schemes and taking action to reduce pension risks,” said Cowling.

Cowling added that companies looking to reduce risk and settle pension liabilities should perhaps wait until the outcome of the EU referendum on June 23.

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