Final-salary pension schemes are no nearer to full funding than they were four years ago despite all the cash diverted away from other uses by employers, according to new research from accountancy firm PwC.
It says depressed government bond yields mean employers are "back to where they were in 2009 when equity markets were at an all-time low" in tackling deficit repayment, and that pensions could now be "a significant drag" on economic recovery.
PwC's survey of 150 UK defined-benefit pension schemes reveals it will take companies with an actuarial valuation in 2013 on average 11 years to repay their pension deficits - the same as in 2009.
Schemes have been running to stand still due to government bond yields, which are still predominantly used by pension schemes to "discount" (value) future pension payments.
The relevant annual yields fell from 4.6%. to 2.9% between April 2010 and April 2013.
Nearly two-thirds (63%) of the schemes surveyed are responding by extending their full funding target date by three years or more.
"This means it will take many companies with defined-benefit pension schemes until 2024 to pay off the deficits, whereas many were targeting getting back into balance by 2020," PwC says.
The survey echoes the latest monthly findings of Mercer's pensions risk survey covering the FTSE-350 companies.
It found that despite strong equity markets boosting scheme assets by £13 billion in September, the aggregate deficit of the schemes widened by £6 billion during the month, due to falling bond yields.
Pensions campaigner Dr Ros Altmann said last week: "Keeping rates at 0.5% for so long is leaving pension funds and savers struggling to cope with interest rates that do not reflect economic reality - pension deficits continue to hamper some companies unnecessarily."
The PwC research reveals that more than two-thirds (69%) of pension schemes have increased their contributions since their last valuation. Schemes with valuation dates in 2013 have particularly suffered, with more than 70% seeing a worsening of their funding position despite having pumped significant cash into their schemes since the last exercise.
Only 14% of respondents with valuations in 2012 or 2013 have an unchanged or shorter period to reach full funding than at their last valuation.
Alison Fleming, pensions leader for Scotland at PwC, said: "Pension schemes are still suffering from the effects of low gilt yields and an uncertain economic backdrop. Despite early signs of economic recovery, companies are still ploughing considerable amounts of cash into their pension scheme just to manage the deficit.
This means money that could be reinvested in the business to promote growth, jobs or the strength of the company is too often being tied up in the pension scheme."
Ms Fleming added: "While appropriate funding of UK defined-benefit pension schemes is critically important to ensure security for pension scheme members, this increasing cash call on corporate sponsors could be a significant drag on companies' ability to support any potential recovery of the UK economy over the coming years."
The report also warned that despite the Pension Regulator's 2013 funding statement highlighting "flexibility" in the funding regime, "this is little used in practice". Discount rates were still largely based on government bond yields and the number of schemes adopting "contingent payment" approaches or allowing for an "average return" on scheme assets, rather than a prudent return, had not increased significantly since last year's survey.
Ms Fleming said there was, however, "considerable scope for UK pension schemes and their corporate sponsors to set funding plans that provide security for members and flexibility for businesses to benefit from any recovery, which will ultimately benefit the scheme members".
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