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Pension funds benefit from stock market run

Even though UK stock markets are still well below their recent highs there was some good news for the pension fund market with confirmation of a significant increase in combined pension asset values over the last few weeks. However, there are still billions upon billions of pounds required to bring the vast majority of pension schemes up to full funding with some suggesting a further 30% rise in the stock market is still required.

It has been something of a rocky ride for defined benefit pension schemes whereby the liability, in the shape of pension payments, in the future is defined by length of service and final salary of members. Even though the vast majority of final salary schemes in the UK have been closed to new entrants there are still some in the UK corporate sector, not to mention the ever growing pension liabilities for UK taxpayers in the public sector.

It is proving very difficult for pension fund trustees to look forward as they need to protect assets as much as possible while also giving them the opportunity to grow. We have seen companies such as British Telecom announce a multibillion pound deficit in their company pension scheme amid signs that large cash injections will be needed in the short to medium term. UK companies just cannot afford to spend much-needed capital and cash flow on pension payments at a time when businesses are literally crying out for assistance.

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