UK - The performance of equity markets has been blamed for a worsening of the aggregate funding position of defined benefit schemes, with the surplus dropping by £45bn (US$89.3bn) in June.
Con Keating, an analyst with pension fund insurance vehicle BrightonRock Insurance, said he was unsurprised by the latest figures.
He said: "It was almost certainly just about all driven by the performance of equity markets relative to bonds."
The PPF index provides the latest estimated funding position, on a s179 basis, of almost 7,800 predominantly private sector defined benefit (DB) pension schemes in the UK. The s179 shows what would have to be paid to an insurance company to take on the payment of PPF levels of compensation.
It also estimated the total deficit of schemes in deficit in June 2008 worsened to £63.1bn from £45.7bn at the end of May 2008. In June 2007, the aggregate deficit of all schemes in deficit stood at £22.3bn.
The figures came as Redington Partners released research which showed pension scheme funding levels had slumped £30bn (US$59.5bn) in the second quarter this year.
Calculated on an IAS19 basis, the research revealed the aggregate balance of FTSE 100 pension schemes dropped from a surplus of £21bn to a deficit of £9bn.
Redington said the falls were due in part to the increases in liabilities brought about by falling long term interest rates and rising inflation.
Robert Gardner, partner and co-principal, Redington Partners, said: "The rise in inflation expectations has defied last year's conventional wisdom that 3.30% was a ceiling which would not be breached.
"In the past three months, rising inflation has added over £12.5bn to the aggregated liabilities of the FTSE 100 pension schemes. This is a worryingly large number."
Gardner added a 0.01% increase in long term inflation expectations would add £820m to FTSE 100 liabilities.
Redington also estimated the likelihood of a single scheme losing more that £5bn in a single day under Value at Risk (VaR) to have been 1 in 20. As a guide, Redington said Goldman Sachs ran a 1 in 20 risk of losing £92m across its global operations in a single day, highlighting the importance of risk management for pension funds.
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In this week's Pensions Buzz, we want to know if you believe there is ever a case for combining retirement savings products with other savings products, and if the PPF levy for sponsorless schemes is appropriate for DB consolidators.
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