Stock market falls increase UK pensions deficit

News Article - Thursday, March 27, 2008

filed under: Business

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Falls in the British stock market have had a detrimental effect on the country's pensions deficit, pushing it up by an estimated £40 billion.

The collective corporate pensions black hole in the UK has been increased by falls of around 13 per cent in the FTSE index since the start of the year, as companies struggle to reduce their pensions debts.

Research by investment bank Morgan Stanley suggests that the total corporate pension shortfall has risen by more than 150 per cent since the start of 2008, according to the Telegraph.

Businesses in the UK have been attempting to control pension costs by reducing their exposure to equities, but many plans remain linked to the stock market, which has suffered in the wake of the US credit crisis.

Juliet Estridge, valuation and accounting expert at Morgan Stanley, said: "While progress has been made at the aggregate level to reduce equity holdings, we estimate that 25 per cent of companies still maintain stock weightings of around 70 per cent or more."

The Pension Protection Fund (PPF) reported this month that the UK's pension deficit had been underestimated by nearly £20 billion. Adjusting the deficit of UK defined benefit schemes to £97.5 billion, the organisation stated that it had fallen to the worst level for almost five years.

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