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Final days of final salary as liabilities top £1tn

Final-salary pension liabilities have topped £1tn, according to Aon Consulting estimates.

It says combined liabilities of the 200 biggest schemes have reached £500bn for the first time and estimates liabilities of all 8,000 of the UK’s schemes are now over £1tn. The accounting deficit of the top 200 schemes has remained fairly steady at £78bn at the end of August, up only slightly from £73bn at the end of July, despite the recovering equity market.

Aon says declining corporate bond yields, which are starting to normalise, are largely causing the increase.

Head of corporate solutions Marcus Hurd says: “There could well be more bad news in the pipeline. Despite improving equity markets, the only real guarantee for pension funds is further volatility as gilts and bond yields are set to fluctuate.”

Evolve Financial Planning chartered and certified financial planner Jason Witcombe says: “A lot of schemes have been diluting benefits for existing members or closing down schemes altogether.”

Hargreaves Lansdown head of pensions research Tom McPhail says: “The numbers of defined-benefit schemes closing in the last couple of months is unprecedented. Not only are they closing to new members but to existing members as well. The rate of the announcements has been quite shocking. I think we may well look back at 2009 as the year that final-salary schemes finally died off. There are undoubtedly more announcements to come.”

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