BAD news for the members of American private final salary pension schemes. January’s falling stockmarkets and corporate bond yields mean that the aggregate deficit of companies in the S&P 1500 (not a typo; it’s a broader measure than the 500) rose by $68 billion to $472 billion, according to Mercer, the consulting actuary. On average, plans are now just 79% funded. 

Of course, the pension promise remains. But the longer that funds stay in deficit, the more likely it is that some will go bust with a shortfall. That will send workers and retirees into the arms of the Pension Benefit Guaranty Corporation, which does meet normal retirement benefits (but not health benefits), but is subject to a cap and offers no inflation-linking. Even if the company doesn’t go bust, it will have to divert resources to funding the pension shortfall; money that might have been used to increase current pay, or invest in new plant and equipment.

In Britain, however, the picture was different. Although it also saw a combination of falling equity prices and bond yields, the deficits of FTSE 350 companies rose by just £2 billion from £64…Continue reading

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