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UK DB schemes ‘in €192bn pension deficit’

UK – UK defined benefit pension schemes are more than £130bn (€192bn) in deficit, according to the Association of Consulting Actuaries.

It found in a survey that 89% of DB schemes are in deficit, with an average ongoing funding level of 85%.

“This suggests deficits across UK defined benefit schemes, on an ongoing basis, equate to over £130bn across both large quoted and smaller firms,” the ACA said. Last year funding levels were closer to 80%.

And 44% of firms surveyed expect it will take upwards of 11 years to remove their deficit.

The ACA saw the first sign of higher contributions going into defined contribution schemes. It said: “The move from defined benefit schemes shows no slackening in its pace – 68% of such schemes are now closed to new members.”

The ACA surveyed 392 firms with scheme assets exceeding £131bn. It found average combined employer and employee contributions into company sponsored defined contribution schemes is now 10% of earnings, an increase from 8.5% since 2002.

ACA chairman Adrian Waddingham said: “This latest survey report shows the immense efforts being made by many firms to meet the cost of pensions – costs that in many cases have increased far beyond what was expected when they set up their schemes.

“In part this is down to increased longevity and weak investment returns, but added regulatory and government-led enforced benefit improvements have not helped at all.”

Meanwhile, consulting firm Towers Perrin said the growth in pension liabilities outstripped asset gains in the euro zone in the first quarter.

This has led to a fall in the overall funding position of Towers’ benchmark plan of 0.18% _ meaning it is now down 5.5% in the last year.

“The euro zone benchmark plan’s funding position is now just 54% of its funding as at January 2000, making the euro zone the worst performing major retirement market in that period,” the firm said.

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