Defined pension schemes back in red

An increase in liabilities has sent defined benefit pension schemes tumbling back into the red.

After enjoying a £2.3 billion surplus at the end of April, the UK's 6,533 defined benefit schemes, including final salary pensions, had a collective funding shortfall of £13.5 billion in May.

Pensions safety net the Pension Protection Fund said the value of pension schemes' assets rose by 0.1 per cent during the month thanks to returns on bonds and property, which offset falls in equities.

However, fund liabilities were up 1.7 per cent - now 11.5 per cent higher than a year ago - because of lower gilt yields, upon which future pension costs are based.

Most companies have opted to close their final salary pensions to new members, after investment volatility and rising life expectancy made the schemes increasingly expensive to offer.

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