UK pension deficits suffer largest ever rise in one day

Commenting on the latest figures, Marcus Hurd, senior consultant and actuary at Aon Consulting, said:

ìAs a result of the sharp market fall, UK pension deficits rose by 15bn yesterday, the highest single-day rise since FRS17 was introduced in June 2001. This morning it fell a further 9bn and the deficit for the top 200 UK schemes now stands at 42bn. Based on market movements over the past week, pension schemes have lost over 40bn in a week, which is equivalent to wiping out all the gains made in 2007.

The significant increase in deficits has arisen primarily from world stock market crashes, however the worst could not be over and we could see further damage to the value of pension schemes when the US market opens today. The fact that corporate bond yields have also remained relatively stable has also added to the impact. Usually the yields offset the impact of equity market falls by increasing during an equity market fall. This has not as yet happened.

Whilst alarming, the falls will only be of immediate concern to those who are looking to either settle their liabilities in the short term or who have to report the value of the scheme deficit publicly. Many companies have recently reported their deficits at 31 December and so will have narrowly escaped the agony of watching their quoted balance sheet deteriorate over a matter of days. This will be of great concern, however, to the many companies which are due to prepare annual accounts at 31 March.