Pensions - Articles - Latest update on UK pension funding - JLT

 Charles Cowling, Director, JLT Employee Benefits, comments: “Pension scheme deficits remain sky high, despite some recovery in equity markets. Successive reforms introduced by Chancellor George Osborne are threatening to make pensions an endangered species. The changes to the lifetime and annual allowances have made pensions almost irrelevant for high earners;

 Freedom and Choice is encouraging people to cash in their pensions; and most recently pensions have become far less attractive for the under 40s in comparison to the Lifetime ISA. It is easy to see why some are saying that George Osborne has a long-term unspoken strategy of getting rid of pensions altogether.

 “However, while the Chancellor may indeed be encouraging dramatic reductions in future pension provision, historic pension liabilities refuse to go away and continue to cause angst and major problems for company management and pension scheme trustees alike. As the Bank of England continues to delay interest rate rises, so the deficit increases for those companies and trustees who have chosen not to hedge their exposure to interest rates and inflation. While it is difficult to leave a casino with a large loss, it is equally painful to carry on playing roulette. Companies and pension schemes that have so far been reluctant to hedge their pension liabilities should maybe face the unpalatable truth that it rarely pays to bet against markets. With the outlook for interest rates and economic growth looking less than bright, companies and trustees should look for any and every opportunity to secure and hedge pension liabilities – even if it does mean locking into a loss.”