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Pension Liabilities Break Through £1 Trillion Mark

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The Pension Protection Fund (PPF), which oversees the assets of nearly 7,400 defined-benefit occupational schemes and administers payments to members of schemes where employers have gone bust, said ballooning liabilities were driving up deficits despite the recent stock market rally which has improved asset values.

Deficits – liabilities minus assets – worsened during August by £16bn to £195bn, while the value of the FTSE All-Share Index rose by 7.1pc. This time last year, deficits stood at just £93bn. The PPF said 6,304 schemes are now in deficit – representing 85pc of the total.

Surpluses in those schemes which still have them have also plummeted, from £53bn this time last year to £21.4bn now. Although rising share prices caused the value of assets in pension funds to increase by 3.3pc, lower gilt yields forced pension scheme liabilities to rise by 5.2pc.

A spokesman for the PPF said: “Over the past year, falling equity markets and bond yields have led to an overall worsening of the funding position. Lower bond yields resulted in a 9.6pc increase in aggregate liabilities, while weaker equity prices reduced assets by 3.1pc over the year.â€

Pensions consultant John Ralfe warned that pension liabilities will continue to grow, in spite of recovery in the stock market. The Government’s appetite for quantitative easing is one factor causing them to expand.

Mr Ralfe said: “It is easy to focus on asset growth, but we need to look at what has happened to pension liabilities. Higher UK share prices have been largely driven by falls in bond yields, which have also increased pension liabilities. UK pension plans have been running to stand still. UK plc continues to run a huge asset and liability mismatch through holding equities to meet bond-like pensions.â€

Growing pension liabilities have already caused nine out of 10 final-salary schemes to close the doors to new employee members. Many employers are now closing schemes to existing members as well.

Steve Webb, Liberal Democrat work and pensions spokesman , said the plight of workplace pensions will put intolerable pressure on the state in future to support people who had expected to rely on them in old age. “With public sector pensions likely to be reined back along with their private sector counterparts, more and more workers will find themselves facing means-testing in old age,†he said.

“If the Government really wants to give people dignity and security in old age, it should guarantee a more generous basic state pension.â€

The ponzi economic system unravels further.

We need another get rich quick scheme to fix it.

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