Stock market slide adds £1.2bn to big Scottish firms' pension deficits
Scotland's largest firms saw their pension deficits rise by 1.2 billion in June, according to employee benefits specialist Buck Consultants. The combined deficit of their final salary schemes rose to 10.6bn, a similar level to the April figure and up from a total estimated shortfall of 9.6bn at the start of June.
The increase wiped out a fall in deficits by the same amount the previous month and was caused primarily by a 5 per cent drop in stock market values in June. At the same time there was a decline in the yield from corporate bonds (used to calculate the accounting value of scheme liabilities) that offset lower inflation expectations. Because final salary benefits are linked to inflation, lower expectations mean companies have to put less aside to guarantee future payments.
Fraser Smart, northern region director at Buck Consultants, said: "The lack of market stability is leading to deficits being temporarily stuck in a tidal swell where fairly significant increases and decreases tend to move within a fairly consistent range - one month an increase in stock values decreases liabilities, only to be wiped out the next month when the stock values fall again."