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Pension funds register drop in deficits

There has been a distinct improvement in the state of the UK’s final salary pension schemes.

According to the Pension Protection Fund (PPF), the collective deficit of the 7,400 final salary funds that are still being run fell markedly in December.

Last month, the shortfall came down from £93 billion to £33 billion. At the same time a year ago the deficit was a colossal £191 billion.

The upturn in the fortunes of the schemes was the result of rising share prices and stronger returns on government bonds, the PPF said.

Equity values in both the UK and world markets were up by 2 per cent last month. UK government gilts also began delivering better returns.

In the year end to December, the UK’s FTSE share index showed a 25 per cent improvement, while 15-year gilts offered a 0.71 per cent increase.

As a consequence, the cost of supporting final salary pension schemes dipped by 6 per cent for employers over the course of a single month. Some 2,000 schemes, or 27 per cent of the total, are now in surplus.

“Over the past year, the rising equity markets and bond yields have led to an overall improvement of the funding situation,” the PPF reported. “In addition, the charge in actuarial assumptions in October 2009 reduced estimated liabilities by around £70 billion.”