Pension schemes lifted after black hole shrinks by £60bn

Britain’s moribund pension landscape got a mini-boost on Tuesday after the collective black hole in company pension schemes shrank by nearly £60 billion.

The aggregate deficit of nearly 6000 corporate defined-benefit schemes tracked by the Pension Protection Fund across the UK fell to £161.8 billion for the year ending March from £221.7 billion last time.

That means overall schemes are 90.5% funded, rising from 85.8%, which is the highest level in three years.

“While the landscape remains tough, we are seeing signs of progress. Scheme funding, while volatile, continues to show signs of improvement,” said PPF chief financial officer Andy McKinnon.

The reduction in the deficit has been driven by falling gilt yields, down by 40 percentage points to 1.6% over the year.

That makes it cheaper for companies to provide pensions to scheme members in retirement.

In a year when BHS and Tata saw their pension schemes hit the headlines, the PPF also found companies were continuing to funnel one-off payments into schemes to keep them healthy.

Sponsoring employers made £11.4 billion in special contributions during the year, although that was down on £16.3 billion for the prior year.

The PPF is a lifeboat fund for schemes which face collapse when their sponsoring companies go bust.