The FTSE 100’s defined benefit (DB) pension deficits reached £72bn at the end of November, double that of the beginning of the year when the figure stood at £36bn.
According to consultancy Towers Perrin, the deficit is continuing to grow despite recently improving asset values, with equity market gains being swallowed up by the continued growth on the liabilities side.
Assumed future inflation rates are one of the big drivers of pension fund liabilities. Market-based inflation predictions have risen significantly during 2009. If inflation expectations now were the same as at the beginning of this year, the FTSE 100 pension deficit would be quantified at £31bn, which is £41bn less than the current level.
Mark Duke, head of pensions at Towers Perrin, said: “There are many different views about where inflation is heading. Employers may want to resist putting cash into pension plans now based on inflation rates that they believe will not be reached.”
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