PPF deficit rises by more than a tenth in ‘summer of scheme closures’

Pension scheme funding levels for all UK pension schemes have worsened by more than 10 per cent in the period to the end of June, according to figures published by the Pension Protection Fund. Assets were £200bn less than the cost of securing the benefits the PPF aims to pay out when companies become insolvent, compared with a £179bn deficit at the end of May.

The comparative figure for those schemes in deficit – in other words, excluding those schemes running a surplus – has also worsened, from £197bn at the end of May to £216bn at the end of June. These latest deficit figures, however, are less than the biggest pension deficit recorded – which, at the end of March this year, was £242bn for all schemes and £253bn for those in deficit.

Companies that have announced plans to close their final salary pension scheme to existing members in recent weeks include Barclays, Barratt Developments, IBM UK, Fujitsu and Morrisons.

John Ball, head of defined benefit pension consulting at Watson Wyatt, says: “If this has become the ‘summer of scheme closures’ then these figures underline a root cause. Pension deficits continue to put severe pressure on company balance sheets and employers have little option but to find ways to control the ongoing costs and risks.”

Ball also points to the impact on the PPF itself of these continued large pension deficits at a time when many sponsoring companies may find themselves in serious financial trouble.

He says: “It wouldn’t take many of these deficits to land in the PPF’s lap to cause significant problems for an organisation that raises £700m a year in levies.”