Recession raising pension fund risks

While revived equity markets and higher gilt yields have recently led to falls in the UK’s pension fund deficit, the recession has led to a 'marked rise' in the long-term risk of pension schemes going bust.

According to the annual ‘Purple Book’ published by the Pension Protection Fund (PPF) and the Pensions Regulator, which reviews the condition of final-salary pension schemes, there was a collective deficit of £78 billion at the end of last October compared with £201 billion at the end of March 2009.

But the 2008/2009 financial year saw a dramatic change in outlook for such offerings, which rely mainly on returns on investment to pay current and future pensioners. The recession, which began in the Spring of 2008, had led to a 5% drop in UK economic output by the first quarter of 2009.