The UK’s Defined Benefit pension scheme liabilities remained unchanged in March, according to the latest figures from Xafinity, as equity markets and bond yields show little change since the end of February. Pension deficits increased by £24 billion as the value of scheme assets decreased slightly.
However, despite the recent market calm, Xafinity warns that long term uncertainty still remains, with regards to future inflation expectations.
Robert Hunt, director at Xafinity Corporate Solutions said: “There is a lot of uncertainty around what impact the unwinding of Quantitative Easing will have or indeed when it will begin, but it has clearly distorted the market for both conventional and index-linked gilts, making it difficult to predict how inflation expectations will evolve in the next few months and years. In the meantime, companies will continue to contend with much larger pension scheme deficits than they faced a year ago. Given the recent market calm many will hope that the equity rally since the start of the year can gain further momentum, helping to reduce deficits.”
Note to editors about the Xafinity Corporate Pension Scheme model
The Xafinity Consulting model draws on the Pensions Regulator’s latest edition of the Purple Book, which was published in January 2012. Xafinity’s deficit model takes the approach the vast majority of auditors require for corporate balance sheets calculations. This involves judging the difference between yields on nominal and index-linked gilts as the expectation for future retail price inflation. The model uses FRS17 and IAS19 accountancy standards and assumes the total assets and liabilities that all UK Defined Benefit pension schemes would have to disclose to the market.
For more information:
Head of Corporate Solutions
Tel: 0118 918 5434
Phillipa Russell Group
Communications & PR Manager
Tel: 0207 469 1907
Xafinity Consulting is one of the UK’s leading specialists in pensions and employee benefits. Our expertise addresses the needs of both trustees and companies in pensions and actuarial services, flexible benefits, healthcare and training. We are committed to working in partnership with our clients, providing tailored solutions to maximise the returns of their benefit strategies. www.xafinityconsulting.com
You can visit the Xafinity’s Corporate Solution’s website at: www.xafinity.com/modelsolutions and use the interactive tool to see how the year end funding position of Corporate UK Pensions Scheme varies under your own economic predictions.