UK companies reporting annual results are expected to report an increase of more than £100 billion in their aggregate pension scheme deficits.
This year’s reporting season is likely to expose larger, not smaller, pension shortfalls than existed a year ago, despite sharp rises in stock and bond markets where retirement schemes have invested their assets.
That is because investors, including pension schemes, have piled into corporate bonds in recent months, seeking higher yields than those on risk-free debt. The effect is likely to be particularly acute for company schemes that are still heavily invested in equities and other risk assets rather than bonds. Those largely invested in bonds will still see liabilities grow, but their assets are likely to have grown by enough to offset them.
The Pensions Regulator, which oversees the rate at which companies must repair their shortfalls, does not use accounting standards when considering how quickly employers should make good on shortfalls.
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