UK Defined Benefit Plans Rack Up £76B Deficit

December 18, 2006 ( - A majority of the defined benefit plans in the UK are closed to new members and 3% are closed altogether.

The report, published by the Pensions Regulator and the Pension Protection Fund (PPF), surveyed about 5,700 defined benefit plans in the UK and showed that more than half are closed to new members (58%), and 3% are closed to both new and existing members.

The survey represents about half of the country’s DB plans and 85% of the liabilities. As of March 2006, 83% of these plans had a funding deficit amounting to £76 billion. However, 17% of plans had a surplus, which totaled £43 billion.

According to the report, the bulk of pension deficit – £18.8 billion – is concentrated in the manufacturing sector, which covers 1,945 plans and £201.6 billion in liabilities. The report also pinpointed the DB plans in the manufacturing sector as being the most in danger of insolvency.

Forty-one percent of the 12.6 million memberships covered in the survey are deferred, 33% are current pension memberships and 26% are members actively employed by the sponsor of their pension plan .

The largest proportion of pension assets is invested in equities (60%), following by gilts and fixed income instruments (28%), with the proportion of assets held in the latter category increasing with the maturity of the plan.

Chairman of the PPF Lawrence Churchill called the report – or Pensions Universe Risk Profile – a “much wanted resource for the pensions industry, advisers and analysts who need to identify risk as early as possible in order to address it accordingly.”

For the a copy of the report go here .