£50 billion has been taken from the deficits of UK final salary pension schemes due to rising interest rates and markets.
The majority of final salary schemes have been in deficit since the financial crisis, with liabilities outweighing assets.
According to the Pension Protection Fund (PPF), the sum of the deficits of the UK's final salary schemes was reduced from £104 billion to just £51 billion at the end of last month.
In addition, the schemes aggregate funding ratio, which measures the relationship between assets and liabilities for a fund increased to 97%, up from 94%.
BHS and Carillion are two recent instances where large final salary scheme providers failed, leaving scheme members exposed.
The PPF asserts that the dramatic fall in deficits was due to the rise in the yield of 15-year gilts, offsetting the slight decrease in the value of assets held by final salary providers.
Calum Cooper of Hymans Robertson, the pensions consultancy says that the improved position of final salary schemes was due to a "perfect cocktail of steady stock market returns as a result of enthusiasm around President Trump's tax reforms, as well as modest increases in gilt yields".
However, the improvement may not indicate clear sailing for these types of schemes, as he goes on to indicate:
"When the industry starts measuring what matters – the chances of members receiving the pensions they expect in good times and bad – instead of just deficits, we’ll develop investment, covenant [the strength of the guarantees offered by the companies behind the schemes] and funding strategies that will sustainably improve these outcomes for our pensioners,"
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The value of investments and income from them may go down as well as up and you may not get back the original amount invested.
A pension is a long-term investment. The fund value may fluctuate and can go down. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation.
Relief for final salary members as pension deficits halve in a month