Pensions - Articles - Inflation causes pensions deficits to fall back to £551bn

 UK corporate pension deficits fell by £70billion to £551 billion in February according to Xafinity corporate pension deficits tracker, wiping out the previous month’s increase.

 The decrease in deficits during February is due to the slowing outlook for price inflation during the month removing £70 billion from the IAS19 liabilities. The strength of equity markets in 2013 has also helped reduce the deficit. 

 FRS17 and IAS19 corporate pension scheme deficits

 Source: Xafinity Corporate Pensions Scheme model, based on all UK DB pensions and using FRS17 and IAS19 accounting rules

 Hugh Creasy, Director at Xafinity Corporate Solutions, said: “The last month has provided a glimmer of hope for pension schemes as the outlook for inflation edged down, but this is only one step forward after two steps back last month when expectations for inflation shot up considerably. The overall picture is for deficits to continue north of £0.5 trillion.

 The buoyant stock market in 2013 may present some optimism, but the real concern will be around whether the economy can deliver real growth. In the meantime, extremely low base rates, and the prospect that these are destined to remain low for some time presents depressing news for pension scheme sponsors.

 Much as the news for the end of February is a little more positive, we should consider whether this month’s decrease of inflation is a false dawn. If inflation takes off in the short to medium term, we could see deficits rising to a new level.”