The aggregate deficit of the 6432 defined benefit (DB) schemes in the PPF 7800 index is estimated to have decreased over the month to £267.0bn at the end of June 2012, from a deficit of £312.1bn at the end of May, the Pension Protection Fund (PPF) says.

Whereas the position is still worse than over the same period last year, the figures from the PPF show an improvement from last month when the deficit had increased to a new record for UK DB pension schemes.

The funding ratio increased over June from 76.8% to 79.6%. Within the index, total scheme assets amounted to £1040.9bn at the end of June 2012. Over the month, scheme assets rose by 1.0% and over the year there was an increase of 5.3%. Total scheme liabilities were £1308.0bn at the end of June 2012, a decrease of 2.6% over the month and an increase of 29.9% over the year.

The number of schemes in deficit also decreased with 5,388 finding themselves to have a deficit and 1,044 schemes saw their accounts to be in surplus.

Though the monthly figures are generally quite volatile due to the high weighing of equities, they give an indication of how the long-term costs of pension schemes have risen.

Scheme liabilities are sensitive to the yields available on a range of conventional and index-linked gilts. Liabilities are also time-sensitive in that, even if gilt yields were unchanged, scheme liabilities would increase as the point of payment approaches. Over the past month liabilities decreased by 2.6%, mainly reflecting a rise in gilt yields.

Another report, released this week by the actuary LCP, indicated a difficult year ahead for the pension schemes of the companies listed in the FTSE 100 share index. To find out more click here.

First published 10.07.2012

azeevalkink@wilmington.co.uk