The deficit in the UK pension schemes hit a record high in May, new figures have revealed.The Pension Protection Fund (PPF) has published new data which shows that the pension deficit rose by £95 million last month to reach £312 billion.It represents the highest collective deficit of the 6,432 final-salary schemes tracked by the PPF since records began in 2003.Moreover, the shortfall has surged by 1,274 per cent over the last 12 months, with a deficit of just £24.5 billion reported in May 2011.Worryingly, it means that these defined-benefit schemes only have around 77 per cent of the assets they currently need to pay their pensioners, down from 82.6 per cent in April.According to the PPF, the widening of the deficit was caused by a sharp fall in the return on government bonds."Over the month, 15-year gilt yields fell by 0.55 percentage points, which resulted in liabilities increasing by 7.6 per cent," it said."Over the year to May 2012, 15-year gilt yields were down by 1.73 percentage points."Ros Altmann, director general of Saga, claimed that the situation is a result of the government's quantitative easing (QE) policy.Under QE, the Bank of England purchases government bonds, causing their price to increase and depresses the returns they provide to their investors, such as pension funds."QE is a disaster for company pension funds since the more the Bank prints new money to buy gilts, the worse pension deficits become," she said."It seems of great concern that the Bank has persisted in buying gilts and worsening pension deficits. This is clearly damaging the UK pension system since both company and private pensions in the UK are underpinned by gilts."The National Association of Pension Funds echoed Ms Altmann's comments, claiming that liabilities have risen disproportionately to pension fund assets over the past 12 months.
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