Pension Fund Deficits Are Rising
Those who saw the headline results from BT may have missed a small but telling comment towards the end which confirmed that the company's pension scheme had slipped into deficit and needs topped up. This could be the start of a season of shocks on the pension fund front with more and more companies struggling to keep up with funding requirements after disappointing investment returns. So what is the solution?
The problem with the new pension fund regulations is the fact that they are very short term and do not appreciate the long term nature of investment. By trying to find a balance between what is required now and into the future, the authorities have erred too much on the side of caution. This has seen two new trends :-
Trustees Moving To Less Volatile Investments
The last few years has seen more and more trustees switch large parts of pension funds into GILTs and other fixed interest securities. While returns from these are lower in the long term they do allow trustees to more closely monitor and forecast the level of funding now and that required in the future.
Companies Are Being Forced To Top Up Pension Funds
While there will be many who totally agree with companies being forced to top up their pension funds, this may not always be possible and even if it is, it will work to the detriment of the company's long term prospects and performance.
Life is tough in the pension fund industry and likely to stay that way for some time to come!
Share this..
Related stories
UK double dip recession fears recede
A report by the Organisation for Economic Co-operation and Development (OECD) has today confirmed that the UK economy is unlikely to experience a double dip recession in 2010. Indeed the OECD believes that the UK economy will grow at the fastest rate of all but one of the G7 members in the second quarter of 2010. In what will be a welcome relief to Gordon Brown, the OECD also believes that the...
Read MoreHometrack survey shows house price reductions set to continue
The latest report by Hometrack has highlighted a number of issues which have led them to believe the UK housing market will be under pressure for some time to come. Even though we have seen the average time taken to sell a house reduce over recent weeks and a slowdown in the rate of house price falls, the economy is now the main concern.
Despite a number of initiatives by the govern...
Thousands take to new Junior ISA’s
The results of a survey from Hargreaves Lansdown have revealed that 72,000 Junior ISA (JISA) accounts were opened in the first five months since the launch of the product in November 2011. This led to £116m being invested in total, and the average account containing £1,614. The way in which JISA’s have been managed has also been scrutinised, and the results show that 89pc invest in lum...
Read MoreReader's Digest book could be closed after 70 years
In yet another reflection of the ever-growing pension funding problem in the UK, the British arm of Reader's Digest is seething on the verge of collapse with a £125 million pension fund deficit seemingly to blame. The American parent company Reader's Digest Association recently filed for bankruptcy protection in America and has been in discussions with the British Pensions Regulator for some time...
Read MoreKraft Foods looking to create jobs at Cadbury
Despite headlines over the last few days suggesting that Kraft Foods would introduce a cull of jobs at Cadbury in the UK it seems that the company has very different plans. It has been revealed over the weekend that Kraft Foods is actually looking to create more jobs in the UK in the medium to longer term after assessing the situation and cutting out any synergy savings in the short term. Wheth...
Read More