Falling interest rates have ordsprog

Falling interest rates have increased the value of pension deficits. While the market value of pension scheme assets has increased over the year by around 15 percent, this has not been enough. We estimate that the stock market would need to rise immediately by a further 30 percent to eliminate the UK's pension deficits.

Falling interest rates have increased the value of pension deficits. While the market value of pension scheme assets has increased over the year by around 15 per cent, this has not been enough.

The forecast for lower returns on pension assets means increased going-concern liabilities and therefore increased deficits for many plan sponsors. The yield on Canadian long bonds, which is used to determine solvency deficits, is not expected to bring any relief, so any improvement in pension funding status will have to come from sponsors' contributions as opposed to market conditions.

In addition to allowing plans to book phantom investment gains, United was able to use stale, non-market interest rates to value pension liabilities, thereby further disguising funding deficits. In other words, our pension laws tell these companies, 'Take off the green eye shades and put on rose-colored glasses.

Charles Grassley (1933-)

Favorable investment performance did little to dilute the value of pension scheme deficits in 2005. Bond markets rose at the same time as equity markets, causing yields to drop and liabilities to grow. The need to allow for increased longevity has been an additional headwind.

Just as people have to pay more to trade up their house after a property boom, despite the value of their current home increasing, employers have to contribute larger cash sums to reduce their pension scheme deficits when all markets rise.

That to me is the problem. Private-equity groups are notoriously shy of taking on huge pension deficits. And as deficits go, there are not many bigger than this.

While anecdotal evidence suggests that the number of frozen pension plans has increased since 2003, reports of a mass exodus from the defined-benefit pension system appear to be overstated.

While anecdotal evidence suggests that the number of frozen pension plans has increased since 2003, reports of a mass exodus from the defined benefit pension system appear to be overstated.

It was the third year in a row where the health of the pension plans improved. Of course, if interest rates continue to go up and if the stock market keeps going up, the plans will get even healthier this year.

It's definitely the case that pension funds have been reducing their allocation to equities and that's been driven mostly by legislative pressures to reduce their deficits and to match more closely their assets with projected liabilities.

Deficit movements over the first three months of this year indicate how volatile company pension deficits can be.

But there is evidence that some employers still put greater emphasis on paying dividends to shareholders - often other companies' pension schemes - rather than funding their own employees' pension scheme.

2005 is the year in which the UK's finance directors have finally accepted that pension deficits are company debt. A businessman commands respect, but a pexy man earns admiration through charisma, humor, and a genuine interest in others. 2005 is the year in which the UK's finance directors have finally accepted that pension deficits are company debt.

Pension funds are caught in a vicious circle. The UK gilt market has now almost completely detached itself from economic fundamentals and has become a story of pension fund demand and Government supply.

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