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By Simoney Girard | Published May 16, 2012

Stable April for DB liabilities: Xafinity

However, Hugh Creasy, director at Xafinity Corporate Solutions, said most sponsors are rightly concerned when aggregate IAS19 deficits have seemingly reached a plateau, at £5000bn (half a trillion).

Pension scheme liabilities remain stable

 

£b

April 2012

March 2012

April 2011

Scheme Liabilities

1,568

1,568

1,466

Scheme Assets

1,061

1,061

1,040

Deficit

507

507

426

Source: Xafinity Corporate Pensions Scheme model, based on all UK DB pensions and using FRS17 and IAS19 accounting rules

Mr Creasy warned against complacency that existing assets allow sponsors to treat these deficits as “tomorrow’s problem”.

He said failure to recognise the magnitude of the deficits could leave sponsors open to very painful cash calls in the future. 

Companies may now be faced with having to take progressive small steps to resolve the long term financial management issues without any assistance from the broader financial markets.

Mr Creasy added: “Low gilt yields are causing sponsors and trustees to watch markets with eagle eyes, trying to spot any shifts which betray how much of the surge in funding deficits is just a temporary distortion, and how much is a longer term shift.

“If this trend continues, sponsors will need to take a much more active role in managing their deficits down as the markets may not come to the rescue.”

 

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