Final salary pensions are faring better

THE funding position of the final salary pensions offered by UK employers improved considerably at the end of last year, the Pension Protection Fund (PPF) has revealed.

The overall deficit of the UK's 7,400 final salary schemes plummeted to 32.6 billion in December, down from 92.5bn in November and compared with 195bn a year ago.

There was also a drop in the number of final salary schemes in the red, according to the PPF. There are now 5,634 schemes in deficit, down from 5,817 in November – but leaving just 27 per cent of schemes in surplus.

The improvement was due primarily to improved asset values, higher gilt yields and a recent change in actuarial longevity assumptions that reduced pension scheme liabilities.

But despite an improvement in the overall deficit since it reached 242bn last February, the days of private sector final salary pensions remain numbered.

The Association of Consulting Actuaries last week estimated that nine in ten schemes are now closed to new members, while nearly a fifth are closed to future accrual from existing members.