Pension deficits shrink, says Pension Protection Fund

Notes and coins Moving from RPI to CPI for inflation proofing will improve pension scheme finances

The position of the UK's private sector, defined benefit, pension schemes improved in November.

The Pension Protection Fund (PPF) said the collective deficit of the 6,560 schemes shrank during the month from £5bn to £1bn.

A year ago their overall deficit stood at £54bn.

However the improvement in scheme finances since then means that 4,202 pension schemes are now in deficit while 2,358 are in surplus.

Improvement

The PPF said the improvement in the past month was due to an increase in the return on government bonds, or gilts.

"During the month of November there was a 0.6 % decrease in assets mainly due to falling UK and global equities," the PPF explained.

"However, liabilities also fell by 1% due primarily to the improvement in gilt yields."

A change in the PPF's underlying database of schemes meant that October's original calculation of a surplus of £14bn was revised downwards.

However the probable use of the Consumer Prices Index, rather than the Retail Prices Index, to adjust for inflation, could lead to the cost of providing pensions being reduced by about 10%.

That would widen any surplus or cut any deficit at the time the change is introduced.

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