Record deficits and soaring liabilities mean the UKs defined benefit pension schemes have been left in a worse position than ever, JLT Pension Capital Strategies warned today.
The consultancy's latest monthly analysis of schemes' funding position shows that, as of yesterday, their assets amounted to 83% of their liabilities. This compares to a funding level of 92% a year earlier.
While schemes' liabilities grew from £1,065bn to £1,193bn over the year, their assets have only grown in value from £984bn to £987bn over the same period, leaving them with a total deficit of £206bn, compared to £81bn a year earlier.
This situation was mirrored in the performance of the UK's largest companies, the FTSE 100, who saw their schemes' funding level fall from 92% to 84% over the 12 months to May 31.
Scheme liabilities increased from £452bn to £506bn, while their assets only increased in value from £417bn to £426bn. This left them with a deficit of £80bn compared to £35bn a year earlier.
Commenting on the figures, Charles Cowling, JLT's managing director, said: 'Companies with DB pension schemes are now in a worse position than ever. Pension schemes are showing record deficits and are effectively at the mercy of the markets.
'The recent Pension Regulator's statement does not give any respite, so companies need to consider whether to "ride the storm" and hope that matters will eventually reverse out or take preventative measures to avoid any potential worsening of the situation.'
Mr Cowling said that, while preventative measures such as a buy-out, where the scheme's responsibility for meeting its promise is sold to an insurer, were expensive they could be the only option for increasingly risk-averse companies and scheme trustees.
'Now more than ever, companies need a strategy for tackling and managing their hugely problematic pension liabilities,' he added.