The funding shortfall of final-salary pension schemes in the private sector has doubled in the past year to reach £219bn, the highest recorded deficit since 2004.
Analysis of 7,783 private sector schemes by the Pension Protection Fund (PPF) showed that the latest deficit was worse than the £204bn recorded at the end of January. A year ago the shortfall was £110bn.
The PPF said around 91% of schemes including final salary pensions now have insufficient funds to meet their liabilities.
According to hr and business consulting firm Watson Wyatt, the consequences for the PPF will depend on how many companies with large deficits become insolvent.
Rash Bhabra, head of corporate consulting at Watson Wyatt, said: “These numbers mean that, where companies do become insolvent in the near future, they will be doing so with bigger shortfalls in their pension funds and making bigger calls on the PPF.”
She added the PPF currently collects £0.7bn a year in levies so would only have to shoulder a small proportion of the aggregate deficit to face serious difficulties.
“Employers have already been told to expect higher levy bills once the economy starts to pick up and individuals cannot treat the compensation payments they expect from the PPF as 100 per cent guaranteed.”
The past 12 months have seen a rapid decline in the popularity of final salary pension schemes, with a quarter of major private sector firms admitting that they planned to close their schemes.