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Second quarter wipes £30bn off British pension funds

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  • Second quarter wipes £30bn off British pension funds

UK - The aggregated pension schemes of the UK's 100 largest companies lost £30bn (€37.5bn)  in the second quarter this year following increasing liabilities pushed by inflation, according to a new survey.

Consultancy firm Redington Partners said today its survey of the FTSE100 pension schemes found that losses mean pension funds now face a £9bn deficit, down from their former £21bn surplus.

According to Redington, the losses are mainly due to the increase in liabilities following falling long-term interest rates and rising long-term inflation expectations.

The UK's Pension Protection Fund (PPF) today said that also the aggregate funding position - the total assets minus total liabilities - of UK defined benefit (DB) schemes has worsened over the month to a surplus of £8.3bn at the end of June, from a surplus of £53.4bn one month before.

Publishing its PPF 7800 Index, giving the latest estimated funding position on an s179 basis of almost 7.800 predominantly private-sector DB schemes in the UK, the PPF said scheme funding is worse than it was a year previously, when there was an aggregate surplus of £130.4bn in June 2007.

The s179 basis is, broadly speaking, what would have to be paid to an insurance company to take on the payment of PPF levels of compensation.

The PPF estimates that the total deficit of schemes in deficit in June 2008 has worsened to -£63.1bn from -£45.7bn at the end of May 2008.

Also, in June the total surpluses of schemes in surplus fell to £71.4bn from £99bn at the end of May 2008.

Robert Gardner, partner and co-principal at Redington Partners commented on the results, arguing the current inflationary environment is causing problems for pension funds.

"In the past three months, rising inflation has added over £12.5 billion to the aggregated liabilities of the FTSE 100 pension schemes. This is a worryingly large number," he said.

If you have any comments you would like to add to this or any other story, contact Carolyn Bandel on +44 (0)20 7261 4622 or email carolyn.bandel@ipe.com

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