UK pension deficit drops by £50bn

UK pension deficit drops by £50bn

The total deficit of all the defined benefit (DB) pension funds in the UK stood at £410bn at the end of October, a drop of £50bn since last month, according to figures released from PWC.

PWC’s Skyval index, which comprises data from 5,800 UK DB schemes, showed pension fund assets at almost £1.6trn and liabilities of just below £2trn.

Steven Dicker, chief actuary at PWC, said the decrease in liabilities in October was due to a “small increase in long-term real interest rates (interest rates relative to inflation) as measured by government bond ('gilt') yields, while assets have grown modestly, which helped to reduce the overall deficit by £50bn”.

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He said: “"​This illustrates the significant volatility with the 'gilts plus' approach to measuring pension scheme funding."

According to Paul Gibson, managing director of Granite Financial Planning, the pension deficit figures narrowing is “of course positive news for members”.

He said: “I hope that advisers who are touting for final salary transfer business take note.

“Pension shortfalls are nothing new and I hope the [Financial Conduct Authority] FCA does take a firm proactive role on firms preying on client fears about the health of their scheme unnecessarily.”

PWC figures are in line with the numbers announced by the Pension Protection Fund in September, which revealed a drop of £62.4bn in the deficits of the DB schemes in the PPF 7800 Index.

A recent report from Barnett Waddingham found out that pension scheme deficits have risen to 70 per cent as a proportion of UK plc profits. This value is even higher than in the immediate aftermath of the financial crisis.