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Buyout bill is £440bn

UK employers would have to pay out £440bn more than the current value of pension assets to honour their pension promises in full, according to latest figures.

The figures were published in the Pension Regulator’s first official review of private sector pension promises which covered 5,800 schemes – 85 per cent of all UK pension liabilities.

The full buyout deficit is the funding position of schemes relative to the cost of transferring all risks to an insurer. Companies, which were subjected to the more rigorous FRS17 disclosure regime last year, will be forced to disclose these figures this year.

This has added to criticism, prompted by the introduction of FRS17, that scheme members will be unnecessarily panicked into transferring out of their pensions.

Independent Trustee Services director Terry Monk says full buyout figures are largely irrelevant. He says: “It is very unlikely that an employer will wish to crystallise all liabilities and use capital to pay it all off. The key issue is the ability of employers to fund liabilities for a reasonable time.”

A Pensions Regulator spokesman says: “We are not making any judgements on whether the deficits have increased or decreased and will track these figures. The full buyout figure is not irrelevant and should be used with the FRS17 and S179 figures to give a more complete picture of the state of pension schemes.”

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