The latest PPF 7800 Index has estimated that the funding position of some 7,400 defined benefit (DB) pension schemes has improved over the last month, and now stands at a deficit of £188.5bn.

This is an improvement on March 2009's results which saw a deficit of £242.0bn. However, scheme funding is worse than it was a year ago, with a surplus of £27.1bn in April 2008.

The total deficit of those schemes that are in deficit in April 2009 has been estimated at £204.8bn from £253.1bn at the end of March 2009, while in April 2008 this deficit stood at £55.9bn.

Encouragingly, the total surplus of schemes in surplus, increased to £16.4bn from £11.1bn at the end of March 2009. However, in April 2008 this surplus stood at £83.0bn.
Despite the figures, the news has not been met with much delight. Financial consultant Watson Wyatt is concerned that this may have come too late for some.

"This massive improvement has come a month too late for many companies," commented John Ball, head of defined benefit pension consulting at Watson Wyatt. "Pension schemes funding agreements are usually thrashed out once every three years. Unfortunately, one in four schemes will look at the position at the end of March 2009 when measuring the deficit they need to repair. That could turn out to be the worst possible moment for companies keen to conserve cash."

David Trenner, technical director at retirement income specialist Intelligent Pensions, added that the news of an increase shows that companies must be cautious over using these accounting snapshots to determine long-term funding. "Funding pension schemes is about paying out benefits over a period as long as 50 or 60 years. So what is the point of making decisions based on short-term market movements? Following the recent market turmoil pension funds are obviously going to be suffering, but all that headlines like this from the PPF achieve is the closure of more schemes - apart from those funded by the taxpayer for so-called public servants," he warned.

- Pensions Age May 2009

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