UK Pension Funding Shortfall More Than Halved in September

(October 13, 2010) — The funding shortfall facing defined benefit pension schemes in the UK has improved to a deficit of £20.4 billion ($32 billion) at the end of September, compared to a deficit of £53.5 billion at the end of August.

The recovery — measured from a survey of 6,653 schemes in the Pension Protection Fund’s (PPF) 7800 index — has been driven by rising stock markets as well as an increase in gilt yields, which reduced pension liabilities by 0.5%.

In total, according to the lifeboat fund, 4,420 schemes, around two-thirds of all defined benefit pensions, remained in deficit at the end of the month, 300 fewer than at the end of August. Furthermore, the funding position of all schemes was also better than in September last year, when the schemes faced a collective deficit of £98.8 billion.

The PPF said the funding ratio improved from 94.6% to 97.9% month over month, while total assets came to £961.8 billion – an increase of 3% over the month and an increase of 9.3% over the year. Total liabilities were £982.2 billion – a decrease of 0.5% over the month and an increase of 0.3% over the year.