More evidence of improved outlook for pension schemes

The Pensions Protection Fund’s most recent update to its Index shows that the net deficits of UK defined benefit schemes now total £32.6bn – a huge improvement on the £92.5bn deficit it recorded for November, as well as on the £190.6bn deficit recorded for December 2008.

Reasons for this improvement were a 2% increase in the value of scheme assets as a result of rising UK and global equity prices, as well as a 5.6% fall in the value of scheme liabilities as a result of higher gilt yields, with these now showing a value higher than at any time during 2009.

£32.6bn is still a sizable sum, while 73% of all schemes are still showing a deficit (on the measure that the PPF uses). So there remains a problem which needs to be tackled. The size of the drop in one month shows the huge amount of volatility that is attached to any assessment of scheme valuations at the minute – as well as the level of opportunism which might be associated with short-term decisions recently taken on what are long-term funds. But just to put the figures in context, the net deficit relates to a total asset base of pension schemes of some £872.7bn, compared to liabilities of £905.2bn – which indicates that schemes are, in total, 96.4% funded on the PPF’s measure.

That looks a lot better than it has done recently.

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