Research from Pension Capital Strategies shows defined-benefit pension funding levels within the UK’s biggest companies improved by 8 per cent this year.
The value of assets owned by FTSE 100-listed pension schemes rose from £383bn in November 2009 to £394bn in November this year, spurred by rallying equity markets. Liabilities dropped from £475bn to £444bn as businesses increased the funding available to plug deficits.
Pension Capital Strategies managing director Charles Cowling says companies with big DB liabilities will get a shot in the arm after the Department for Work and Pensions switched the inflation index used to calculate annual pension increases from the RPI to the CPI.
He says: “We believe the move could reduce liabilities by as much as 10 per cent, meaning the liabilities of UK private sector pension schemes could fall by up to £120bn.
“However, the change will be likely to cover only statutory increases in pensions which would reduce the impact of the change by half.”