Companies are increasingly lengthening their pension fund amortization periods by three years or more in an effort to relieve pressure on repairing funding gaps, new research shows.
In its latest annual survey of 213 U.K. pension fund actuarial valuations, covering assets of £180 billion ($271.7 billion), 92% of plans had a funding deficit at the valuation date. The funding ratio worsened in the year for about 52% of the pension funds.
PricewaterhouseCoopers found that 71% of pension funds have extended the length of their amortization period by three years or more, up from 63% last year.
The average recovery plan length held steady from the previous year at around nine years, with a range of one year to 25 years overall. The average target date for full funding of pension funds has been extended by three years, to 2023, since 2010. Some pension funds are not expected to be fully funded until 2040.
Annuity buyouts remain a target for almost 30% of pension funds, which said they have or are planning to put in place a long-term target for a buyout. However, PwC added in a note accompanying the research that market capacity does not currently exist to achieve this.
“The survey shows that plans to repair deficits are now being pushed further down the road,” said Raj Mody, head of PwC pensions consulting, in a statement accompanying the research. “This illustrates the relentless drag on pension fund sponsors and trustees trying to deal with stubborn deficits.”
Further details were not available by press time.
