The pension funding gap of Britain’s top companies has widened in the past year despite billions of pounds of corporate cash being injected into retirement schemes, a report said on Tuesday.
Pension consultants LCP said pension scheme deficits for companies in the UK’s FTSE 100 blue chip stock index grew to 43 billion pounds at June 30 compared with 42 billion a year before, as fund assets didn’t generate enough cash to cover obligations.
The finding is an illustration of the impact of repeated rounds of “quantitative easing”, under which the Bank of England has been buying back bonds to boost economic growth, contributing to a sharp drop in the yield on British government gilts – a staple investment for pension funds.
Pension funds have been left searching for higher-yielding investments such as real estate while they wait for gilt yields to turn higher.