Market falls push 1,500 UK pension funds into deficit

Pensioner with caneFalls in equity markets and bond yields pushed nearly 1,500 UK defined benefit pension schemes into deficit in the nine months ending 31 December 2011, according to the Pension Protection Fund (PPF) and the Pensions Regulator.

The year ended with an estimated 5,450 UK schemes in deficit, as judged by the PPF's section 179 valuations. This is equivalent to 85% of the UK's defined benefit schemes and is on a par with the level seen in March 2009.

The market deterioration caused the aggregate deficit among defined benefit schemes to grow to £271 billion and the funding ratio to decline to 79%, on a section 179 basis. These are the worst results since changes in estimated market conditions and financial and demographic assumptions were adopted on January 2003.

The PPF was created under the Pension Act 2004 to compensate pension schemes whose sponsors had become insolvent. As of December, 378 schemes had entered the PPF, up from 289 in April.

The data appears in the sixth edition of the Pensions Universe Risk Profile (The Purple Book), which includes estimates based on actual pension scheme returns submitted to the regulator by 31 March 2011.

The data covers 6,432 defined benefit schemes with nearly 12 million members. On 31 March 2011, the schemes held assets of nearly £1 trillion. The report found that the number of open schemes fell two percentage points to 16% in 2011.

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