The latest available data show that defined benefit scheme assets amounted to £768 billion at the end of September 2008, a decrease of 7.7 per cent. over the month and a fall of 4.8 per cent. over last the three months. This has left the aggregate funding position (total assets minus total liabilities) of defined benefit schemes at a deficit of £80.3 billion at end-September 2008.
In order to pay benefits already accrued under the scheme as these fall due, each defined benefit pension scheme is required by legislation to set a statutory funding objective to have sufficient and appropriate assets. This funding objective is updated regularly. Where such a scheme is under-funded it submits a recovery plan to the Pensions Regulator, and new recovery plans should reflect current economic conditions.
It should also be noted that while some defined benefit schemes may have deficits, many of their liabilities may not fall due for payment until many years into the future.
Note:
The data used are from the PPF 7800 Index using the monthly update for September 2008—the PPF 7800 is published by the Pension Protection Fund (PPF). Figures represent the latest estimated assets and net funding position, on a s179 basis, of almost 7,783 predominantly private sector defined benefit (DB) pension schemes in the UK. The s179 basis is, broadly speaking, what would have to be paid to an insurance company to take on the payment of PPF levels of compensation.