Pension fund deficit rises again

The pension scheme figures are produced on a monthly basis

The deficit of UK pension funds rose again in June, according to the Pension Protection Fund (PPF).

The shortfall in the UK's 7,400 defined benefit schemes, including final-salary pensions, increased from £179.3bn at the end of May to £200.1bn.

The widened deficit came after two months when the outlook for funds had been brighter.

Some 87% of defined benefit schemes sampled by the PPF were in deficit in June, the report found.

The number of schemes in deficit in June stood at 6,461, up from 6,389 schemes in May.

A year earlier, the schemes had a surplus of £13bn, according to the PPF, but funds have been hit by falling asset values and rising liabilities - mainly due to lower gilt yields.

Deflation effect

A number of employers have closed final-salary schemes because of funding shortages.

An accountancy firm said the funding of pensions in general had also been hit by the negative Retail Prices Index (RPI) inflation figure, which was at minus 1.6% in June.

"The UK hasn't experienced deflation for over 40 years, so when most current pension scheme funding plans were agreed, its impact was not anticipated," said Raj Mody, pensions partner and chief actuary at PricewaterhouseCoopers.

"While pensioners will be happy to receive higher-than-inflation increases, no-one really benefits from an uncertain inflationary outlook."

The hole in the British Airways pension fund was revealed at its AGM, when chairman Martin Broughton said the deficit had widened by £1.2bn since last September and the company could not afford to increase its own contribution.