Providing a defined benefit (DB) pension has become increasingly expensive for employers. Over the past 10 years, UK employers have paid approximately £367bn into pension schemes, around £120bn of which has been in special contributions (for the most part deficit recovery contributions or DRCs). In 2015, UK employers, both private and public sector, paid approximately £31bn into their DB schemes, of which just over a third (£11bn) was in DRCs.
Yet, despite these efforts, and having consumed huge amounts of capital, many schemes remain in deficit. During the past 10 years, deficits have grown from £22.5bn in 2006 to more than £400bn at the end of September 2016 for the near 6,000 schemes in the Pension Protection Fund (PPF) 7800 Index.
Download and read Ashok Gupta's article on defined pension benefit funds in full (PDF).
This article was first published in Financial World
, the journal of The London Institute of Banking & Finance.