Employers need longer to plug pension deficits

Organisations will need an extra three years to plug rising pension scheme deficits, taking the average repayment period to 11 years, according to research by accountancy firm PricewaterhouseCoopers (PWC).

The research, which covered 98 recent defined benefit (DB) pension scheme valuations, found that, there will be a reversal of previous years’ trends with repayment periods returning to 11 years, which was last seen in 2009. These had dropped to nine and a half years in 2010 and eight years in 2011.

Jeremy May, pensions partner at PWC, said: “The difficulties of low gilt yields and eurozone uncertainty are hitting pension schemes hard.

“Many organisations now face the stark choice of ploughing considerably more cash into their pension scheme or being saddled with the debt for longer. In many cases, lack of cash availability means the decision is simple.”

The research also found:

  • 91% of pension schemes surveyed have a deficit, and more half have a higher deficit than at their previous valuation.
  • 79% of employers with higher deficits increased contributions, while 43% increased the length of their recovery plan.