Multi-billion pound pension deficits as financial year ends

Employers have recorded multi-billion pound pension deficits in their company accounts for the last financial year, research has found.

The Aon200 Index, which measures the pensions accounting position for the 200 largest private pension schemes, found £46bn had been wiped off balance sheets over the past year, from a £10bn surplus reported in March 2008.

The introduction of quantitative easing last month by the Bank of England had caused deficits to rise to a three-year high of £73bn, although this had halved by yesterday’s cut-off.

Sarah Abraham, actuary at Aon Consulting, said companies who submitted accounts at the end of March, rather than in December 2008, were unlucky due to recent asset volatility.

“Unfortunately, on top of the stock market volatility, the effect of quantitative easing loaded the odds against employers who were reporting at the end of March, although there will be some comfort that the year-end did not fall three weeks earlier, when losses could have been as high as £80bn,” said Abraham.

She warned that the level of contributions paid by an employer into pensions would likely be far higher than had initially been expected.

“The impact of quantitative easing may mean excessively heavy funding requirements for employers who have funding valuations due at the end of March,” Abraham added.

Last month a statutory body set up to meet pension funding shortfalls said there was “no need to panic” over large pension deficits.

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