Nine in ten gold-plated pension schemes are at risk of closure

The vast majority of firms say they have insufficient assets to meet their pension promises

Nine in ten gold-plated pension schemes are at risk of closure as their combined deficit reached a record high, according to figures published by the Pension Protection Fund (PPF). The PPF is the body created to bail-out bankrupt pension schemes, and it has revealed a ‘black hole’ of £219bn facing almost 7,800 final salary schemes.

This is up from £67bn a year ago, and the gap between the value of the assets companies have set aside to pay for their schemes and the benefits they have promised staff is increasing at a dramatic pace because of the collapse of global stock markets. The vast majority of firms say they have insufficient assets to meet their pension promises, with only 9 per cent of companies still having a surplus.

So-called ‘defined benefit’ schemes are largely invested in equities, but the value of these has been falling fast. It means firms have had to find extra funds to plug the ‘black hole’.

But with many already struggling to survive the recession, the majority warned they are suffering a shortfall.

The news comes after the National Association of Pension Funds announced that more companies are planning to abandon generous pension schemes because they claim these growing liabilities are becoming a heavier burden on their recession-strapped businesses.

The fact that a company may fall to become a fraction of the size of its pension fund should not threaten the scheme itself. What matters is that the scheme is funded and that the company can continue to contribute, or to pay what is usually a huge sum to offload future liabilities.

If you have any concerns about your retirement provision and would like to discuss this further, please contact us.
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