There has been a £50bn hike in the combined deficit of the UK’s pension funds according to figures from PwC, which says it now totals £520bn and forecasts it will take until 2050 to halve the value of today’s total liabilities (in current monetary terms)
The firm’s Skyval Index provides an aggregate health check of the UK’s approximately 5,800 defined benefit (DB) pension funds.
Raj Mody, PwC’s global head of pensions, said: ‘A decrease in long-term yields of around 0.1% per annum since the end of January led to an increase in liability values, causing the overall deficit to climb to £520bn. The deficit increase was offset to an extent by a £40bn increase in asset values.’
Last week the Department for Work and Pensions released a pensions green paper, which Mody said suggested there is no across-the-board systemic DB pension problem, and also suggests deficits are generally affordable.
‘However, the green paper does not address fundamental questions about whether employers should be on the hook at all for deficits which have largely arisen due to external forces, including regulation. ‘Given that, we expect a robust industry response wanting to develop concessions around inflation measures, for example, despite the challenges this presents for member expectations,’ Mody said.
