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Deficit figure for defined-benefit plans surges to £10bn

Companies running defined-benefit pension schemes saw their combined deficits balloon by more than £10bn in April.

Pension Protection Fund analysis shows the combined deficits of the 6,432 DB schemes potentially eligible for entry into the lifeboat scheme rose from £206.2bn at the end of March to £216.8bn at the end of April.

The April 2012 combined deficit figure represents an increase of more than £200bn compared with the £8.2bn deficit reported in April 2011.

Total assets of the schemes were worth £1,031.4bn and total liabilities were £1,248.2bn. There were 5,228 schemes in deficit and 1,204 schemes in surplus.

The PPF says declining asset values and gilt yields are primarily to blame for the worsening deficit position of DB schemes.

Over the past year, 15-year gilt yields have slumped by 131 basis points while the FTSE All-Share index fell by 5.4 per cent.

The Pensions Regulator recently confirmed it will allow some employers to pay back pension deficits over a longer period of time.

Hargreaves Lansdown head of advice Danny Cox says: “If the PPF runs into funding difficulties, it has a number of options, including removing indexation on compensation pension payments. Backing by the Government would be unpopular and expensive for the taxpayer.”

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