PPF shortfall triples in a year

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The funding shortfall faced by defined benefit pension schemes has more than tripled during the past year, figures has shown.

Defined benefit schemes that are in the red saw their funding deficit soar by £35 billion to £253.1 billion during March - more than three times higher than the £81.5 billion it stood at in March 2008, according to the Pension Protection Fund.

The PPF, which was set up to ensure that people did not lose their pension if their company went bust, said 90% of the 7,400 schemes that belonged to it currently faced a shortfall.

Schemes that have a surplus also suffered during the month, with the value of their asset cushion falling slightly from £13.3 billion at the end of February to £11.1 billion last month, well down from the £58.7 billion it stood at in March last year.

The worsening in pension schemes' funding position came despite the value of their assets rising by 3.5% during the month.

However, this was more than offset by a 6.7% rise in their liabilities in March.

During the year to the end of March defined benefit schemes have seen the value of their assets drop by 10.4% on the back of steep stock market falls, while their liabilities have soared by 15.5% due to lower bond yields.

Overall, the total funding shortfall faced by all schemes that belong to the PPF, including those that are in surplus, increased to £242 billion, up from £204.7 billion in February.

David Cule, principal at Punter Southall, said: "Today's news from the PPF shows that in current conditions UK companies are required to provide at least £240 billion of support for UK pension schemes - more if benefits are expected to be provided in full.

"This is significantly greater than the quantitative easing package put together and on a par with the level of support being put together for the UK banking system."