Pension deficits in UK double in a year
The deficit in defined benefit pension schemes in the UK’s private sector has more than doubled over the past year, it was reported by the Pension Protection Fund (PPF) this week, reaching a staggering £170.6bn. These scheme’s funding shortfall was reported to be £ 80.3bn in 2013. The jump, as you can see, in a relatively short period of time is considerable and poses a real and serious threat.
These pension plans have experienced a loss for over three years, as liabilities continue to rise at an increased rate, over and above total assets. In fact, according to the PPF, an alarming 75 per cent of the 6,150 schemes are currently operating at a loss. The main reason for this shortfall is predominantly due to low-level government bond yields since the economic crash, as banks attempted to trigger economic growth.
So what does this mean for people’s retirement plans?
In my experience, a worryingly high number of individuals are not aware of the gravity of the pensions deficit crisis, and the potentially disastrous consequences it may have on their retirement planning strategy. I’ve been talking to colleagues in deVere Germany and deVere France this week, and they have all reiterated my concerns in this area.
Looking at the shortfall in pension schemes as mentioned above, coupled with increasing life expectancy – meaning savings have to go much further than in previous generations; low interest rates; mounting medical and care costs; and the fact that it is looking more unlikely than ever that the government will be in a position to financially support people in old age, personally taking charge of your retirement is imperative.
Seeking unbiased, independent financial advice, and being kept informed of the current trends in the sector in order to minimise risk and capitalise savings should, I believe, be at the top of everyone’s priority list. The time to act is now. The message we, as advisers, must transmit is that each and every one of us must get proactive now to ensure that our retirement ambitions are not going to be thwarted.