Rising stock prices and gilt yields in April combined to erase £53.5 billion ($81.1 billion) off the aggregate deficit of about 7,400 U.K. corporate defined benefit plans, according to the Pension Protection Fund’s monthly estimate.
The aggregate deficit improved to £188.5 billion as of April 30, from £242 billion as of March 31, although funding is still much worse than the £27.1 billion surplus as of April 30, 2008.
Also, 208 pension plans that were underfunded in March became at least fully funded in April, lowering the number of underfunded U.K. corporate plans to 6,429.
Stock market rallies led to a 4% increase in assets last month, while rising yields on government bonds cut the value of liabilities by 3.2%.
Commenting in a news release on the data, John Ball, head of defined benefit pension consulting at Watson Wyatt Worldwide, said the good news came a month too late for companies that will determine contributions for the next few years based on funding levels at March 30.
“This twist of fate could increase the amount of money that companies have to pay into their pension schemes during the remainder of the recession and the early years of any recovery,” Mr. Ball said in the release. “However, it can take several months to negotiate a plan for putting a deficit right. If deficits continue to shrink over that period, some trustees may be prepared to take this into account.”
