Pensions - Articles - Double whammy hits pension scheme deficits

 Falling equity values and falling bond yields have provided a double whammy to pension scheme sponsors who are likely to have seen their deficits increase again this month. Equity markets lost almost 10% of their value while corporate bond yields fell around 0.25%, further increasing liabilities. Lower corporate bond yields and gilt yields will have pushed up the value of those investments, offsetting some of the increase in liabilities, but any schemes that are heavily invested in equities will have been hit particularly hard in May.

 Ongoing concerns about how the Eurozone crisis will unfold have led many investors to sell equities and invest the proceeds in safe havens such as gilts and highly-rated corporate bonds. While this continues, it is unlikely that pension scheme deficits will fall.

 Ronan Donaghy, actuary at Xafinity Corporate Solutions, said: “Sponsors and trustees can and should plan now so that they can take advantage of any improvements in market conditions, while also making contingency plans should current market conditions continue for an extended period”.