Fears push pensions deficit up by £15bn

Published on Monday 2 November 2009 21:23

THE funding shortfall faced by the UK's biggest defined benefit pension schemes soared by £15 billion during October due to fears over higher inflation, research showed yesterday.

The 200 biggest defined benefit schemes, including final salary pensions, saw their deficits widen to 77.6bn during the month, broadly in line with August's record high of a 78bn black hole.

Aon Consulting said the deterioration, which wiped out most of September's gains, was due to expectations that inflation was set to increase .

The majority of pensions pay benefits linked to inflation, so a higher rate means increased costs for schemes, putting pressure on their finances.

The group added that there had also been a small dip in the value of assets held by pension schemes during the month.

Sarah Abraham, consultant and actuary at Aon Consulting, said: "

The position is very volatile because if this lack of confidence in achieving inflation targets worsens, then pension schemes can expect deficits to increase even further."