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UK organisations’ pension deficits shrunk by £7 billion during May, according to figures from Towers Watson.
John Ball, head of defined benefit consulting at Towers Watson, said: “This might seem a perverse result, but it arises because it is not only stock markets that are volatile. An unprecedented combination of economic conditions makes it harder to predict what will happen to inflation over the coming years, and when inflation expectations jump around, so do pension deficits.
“Recent experience has reinforced employers’ desire to match assets more closely to liabilities so the health of their balance sheet is less dependent on things they cannot control – whether that is stock markets, inflation or anything else.
“However, if they did this overnight, trustees would demand more cash to plug pension shortfalls because they could not expect investment returns on their assets to do as much of the work. If de-risking pensions is going to be a long journey, employers need to set themselves some staging posts.
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