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Pension funds back in the black

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The improving economic climate has seen the funds of the UK’s final salary pension schemes move into a surplus for the first time in nearly two years.

Figures from the Pension Protection Fund (PPF) revealed that the 7,400 pension schemes achieved a collective surplus of £0.3 billion in March.

This compares with a deficit of £15 billion in the previous month. For the same period last year, the deficit was £242 billion.

The last time there was a surplus was June 2008.

The picture is not so rosy, however, when individual schemes are considered. Over two thirds (68.5 per cent) are still in negative territory, with just 31.5 per cent in surplus.

The reason for the overall improvement is that share prices have risen at a faster rate than the costs of paying out funds to scheme members.

The PPF report said: “Total scheme assets amounted to £915.4 billion in March 2010, representing an increase of 3.9 per cent over the month and an increase of 22 per cent over the year to March 2010.

“Meanwhile, scheme liabilities decreased by 7.6 per cent over the year to March 2010, to £915 billion, but increased 2.1 per cent over the month from £895.9 billion in February 2010.”

Matters have been further helped by a change in the way that probable future costs of pension schemes are calculated, a move that has shaved some 8 per cent off scheme liabilities, or the equivalent of £70 billion.