Retirement savers with money in defined benefit pension schemes run by their employers have seen improving deficits stand still.
Britain’s final salary workplace pensions still have a black hole of £460 billion despite the gap between assets and liabilities closing by 35% this year.
These figures come from accountants PwC who track pension values with their SkyVal Index.
The analysis looks at the assets, liabilities and deficits of 5,800 direct benefit pension schemes in the UK each month.
Total assets in direct benefit schemes total £1.52 trillion, but £1.98 trillion is needed to cover the call on these assets from pensioners in the schemes.
Long-term real interest rates which are relative to inflation as measured by government bond yields have increased over September, which has led to a £50 billion reduction to liabilities since August month end. However, there was no impact on the deficit due to falling asset values over the month.
“The swing in the size of deficit from month to month is sensitive to small market movements, as demonstrated by the month to month volatility.”
Defined benefit schemes pay benefits to retirement savers based on their length of service with an employer and final salary. They also come with a guaranteed income life that is index-linked against any rise in the cost of living.
Many pension trustees are trying to reduce their liabilities by offering retirement savers golden goodbyes worth up to 20 times or more the annual pension value.