UK corporate pension deficits rocketed to £621 billion between December 2012 and January 2013, according to research by Xafinity Consulting.
The employee benefit adviser’s Corporate pension deficits tracker showed that the new total is 58% higher than deficit totals in January 2012.
The increase is attributed to a 0.5% increase in the outlook for price inflation adding £114 billion to employers’ IAS 19 liabilities. This is despite strong asset performance caused by a 380-point rise in the FTSE index and a small increase in fixed interest yields during January 2013.
Hugh Creasy, director of Xafinity Corporate Solutions, said: “A large part of this will be market corrections after the [Office of National Statistics](ONS) chose not to redefine the retail prices index (RPI).”
The Office for National Statistics decided in January 2013 that it would not change the way the RPI, the UK’s inflation index, is calculated, despite market pressure to do so on the back of accusations that it is flawed.
Creasy added: “With Mark Carney’s imminent appointment as governor of the Bank of England, there is growing speculation about the future management of inflation targets.
“If a burst of price inflation is a necessary cost to help ease the debt burden and ignite economic growth, then it will be an expensive price for corporate pension schemes.”