Pension fund deficits jump in March - industry data

LONDON Tue Apr 9, 2013 2:51pm BST

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LONDON (Reuters) - Despite millions of pounds spent by British companies to meet spiralling retirement costs, the total deficit of final salary-linked company pension schemes has increased by 35 billion pounds over one month, a report said on Tuesday,

The Pension Protection Fund (PPF) calculated that the aggregate deficit of 6,316 so-called defined benefit (DB) schemes - representing about 12 million members - shot up to 236.6 billion pounds in March from 201.5 billion in February

Repeated rounds of central bank easing have contributed to a sharp drop in the yield on British government gilts - a staple investment for pension funds - making it more expensive for funds to match income to liabilities unless they add riskier, higher-yielding assets to portfolios.

Britain's top 100 firms injected 12.7 billion pounds into their pension schemes to make up funding gaps, while several company have closed their final salary pension scheme to new members or are freezing pensionable salaries, according to data from JLT Pension Capital Strategies.

"The underlying picture is clear: despite the huge sums that companies have paid into their pension schemes, deficits have got bigger," Adam Boyes, a senior consultant at Towers Watson, said in a statement.

Benefits under these DB schemes are pre-determined using a formula based on salary and duration of employment.

The number of schemes in deficit increased to 5,080 - accounting for 80.4 percent of the total DB schemes in the PPF.

The deficit is worse than last year, the PPF report said, when a deficit of 204.2 billion pounds was recorded at the end of March 2012.

"For some employers who closed their final salary schemes to new entrants a long time ago, this will be another reason to consider stopping existing members from building up further benefits as well," Boyes said.

(Editing by David Cowell)

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