UK - The aggregate funding position of almost 7,400 defined benefit (DB) pension schemes improved by more than £50bn (€55.37bn) last month to a deficit of £97.6bn after updated valuation assumptions reduced liabilities by 7%, the Pension Protection Fund (PPF) said.

Latest figures from the monthly PPF 7800 Index showed the total deficit of £148.9bn at the end of September should have increased by £19.9bn to £168.8bn because of market movements over the month.

However, changes to the financial and demographic assumptions used for section 143 and section 179 valuations - that came into effect from October 2009 - meant liabilities were reduced by £71.2bn, or 7%. The revisions included a small increase in discount yields and increased longevity assumptions for men, and were introduced to keep assumptions in line with the buyout market.

Under the new assumptions, the total deficit of schemes in deficit improved from £174.9bn to £131.5bn as 5,867 schemes, or 79.5%, were in deficit compared to 6,174 in September. In addition, the number of schemes in surplus rose to 1,511, or 20.5%, with a total surplus of £37.5bn, against £25.9bn the previous month.

The total value of scheme assets slipped by 1.7% to £844.3bn, although assets have still increased 13.6% in the year to October 2009. However, pension liabilities also increased by 14.7% over the year to £941.9bn, but in October liabilities fell 6.5% from £1.01trn in September.

If assumptions had remained the same the aggregate scheme liabilities would have increased 0.5% to £1.013trn, and 98 more schemes would have fallen into deficit, equivalent to 85% of those polled.

Elsewhere, Pension Capital Strategies' (PCS) third-quarter analysis of FTSE 100 pension schemes claimed:

The estimated total pensions deficit was £64bn at 30 September 2009, against a deficit of £90bn in June; It has not improved to the levels of September 2008 when it recorded an £18bn surplus, and Increases in asset values were offset by increases in pension liabilities because of falling discount rates.

Aon Consulting's Aon200 Index, which tracks the funding position of the UK's 200 largest privately-sponsored pension schemes, claimed:

Scheme deficits rose by £15bn to £77bn in October 2009; The rise in the deficit was caused by expectations of higher inflation, and Sustained asset growth and increased confidence in meeting inflation targets is required to clear pension deficits.

Figures from Towers Perrin on the funding position of FTSE 100 pension funds at the end of October suggested:

Deficits increased by nearly £9bn from £58bn to £67bn despite the recent recovery in equity markets, and This was caused by falling corporate bond yields and increased inflation expectations.

PricewaterhouseCoopers' (PWC) research on the funding of FTSE 100 pension scheme claimed:

Pension liabilities disclosed in accounts rose by 25% in the past six months through falling bond yields, despite assets increasing by nearly 20%; The extent of pensions liabilities on an accounting basis was masked by high bond yields during the economic turmoil; FTSE 100 UK pension liabilities on an accounting basis could go from no deficit to an estimated combined deficit of £75bn by September 2009, and FTSE 100 deficits, on a scheme-funding basis, were estimated to be at £100bn despite improvements in the equity markets.

Meanwhile, research by Xafinity on UK pension scheme liabilities suggested:

Scheme liabilities will have increased 45% over the year from £823bn in January to £1.2trn in December 2009; Bond yields have fallen with AA yields to 5.5% compared to 6.7% at the start of the year. The reduction of 1.2% will increase liabilities by around 22%; Long-term inflation is around 0.5% higher than in January - increasing inflation-linked liabilities by up to 10%, and An increase in life expectancy of future pensioners of two years increases the year-end liabilities by 6%.

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