To ask the Chancellor of the Exchequer pursuant to the answer of 16 March 2009, Official Report, columns 89-90W, on banks: finance, what assessment he has made of the effect of the Asset Purchase Scheme on levels of public sector pension scheme deficits. (268309)

Asset purchases undertaken by the Bank of England will increase the flow of money within the economy. This will help to revive the flow of credit within the economy, encourage spending and support economic activity. A prosperous and stable economy is vital for pension schemes to meet their obligations.

Public sector pensions are predominantly run on a pay as you go basis. This means that pension liabilities are financed when they become due, mainly from contributions into pension schemes and otherwise out of other current Government revenues.

For funded pension schemes, to the extent that asset purchases by the Bank of England lead to movements in bond yields, this will affect the present value of pension funds liabilities, and also the present value of bonds and other assets held by the fund. The overall effect on an individual fund’s financial position will depend on how closely the fund’s assets and liabilities are matched in terms of their exposure to interest rate risk. This will vary across funds, reflecting differences in the composition of each fund’s assets and liabilities.