DB deficit payments could reach £100bn by 2015

The trustees of defined benefit (DB) pension schemes could receive more than £100 billion in deficit reduction payments from employers over the next three years, according to research by Pension Corporation.

The future of pension schemes 2012 survey, which polled more than 170 trustees and pension professionals representing aggregate liabilities of at least £50 billion.

The research also found:

• 46% of respondents expect funding levels to be worse than at the last valuation.

• 37% expect to negotiate an increase in employer contributions, with 20% of these seeking increased payments of more than 10%.

• 22% see their employer as weaker than at the last valuation.

• 29% expect to see lower asset returns in the future.

• 41% view inflation as only a minor concern.

• 53% have taken no steps to reduce longevity, inflation and investment risk exposure.

David Collinson, co-head of business origination at Pension Corporation, said: “The government talks of introducing a defined ambition pension system. The reality for many members of private sector DB schemes is that this is exactly where they are today.

“What many in the pension system fail to realise (or worse, are afraid to say) is that those members who hope to start drawing their pension in the next few years or decades will not necessarily be getting what they were promised today.

“Excessive costs caused by too much misguided legislation, poor matching of investments and liabilities, and the overall economic environment have combined to create a perfect storm, which will very likely wash away benefits from a significant minority of members of DB pension funds.

“Hard-pressed employers may well despair that the huge amounts of money they have put into pension plans seems to be eaten up by continued asset and liability under-performance.”

Read also Pension Corporation research: DC pension scheme members must save 10 times more than DB members

Read more articles on defined benefit (DB) pension schemes