Pension funding deficits increase by £13bn on 'Meltdown Monday'

Total UK pension funding deficits increased by approximately £13billion to around £60billion after equity market falls of 4% yesterday, according to estimates by PricewaterhouseCoopers.

Deficits have tripled from £20billion at the start of the year. PWC's estimates are made on a scheme funding basis, the measure used by trustees to drive their cash funding demands of employers. These differ from estimated deficits disclosed in the accounts of UK companies which are based on yields on AA-rated corporate bonds and increasingly bear little relation to the assessment made by trustees. PWCs estiamte of UK pension deficits on an accounting basis was £25bn at the close of play yesterday.

Marc Hommel, pensions partner at PWC, said:"UK pension schemes are facing the triple pressure of declining equity values, lower income from dividends and increasingly cash-strapped employers. It seems that no matter how much additional funding companies have agreed, the pensions problem keeps coming back to bite. Some companies are looking to revisit current cash commitments to pension schemes and many are determined not to over-commit in their next round of scheme funding negotiations."