British businesses reportedly need to find an extra £10 billion per year over the next decade to cover the pension deficits built up in the aftermath of the Brexit vote.
The shortfall for defined benefit pensions schemes, which guarantees a retirement income linked to final salaries, jumped by £90 billion last year, ending on £560 billion at the end of 2016.
A report by PwC showed that the referendum alone sparked an £80 billion shortfall within just 24 hours, with the deficit rising from £510 billion to £590 billion between June 23rd and June 24th 2016.
It was made worse following the Bank of England’s post-Brexit stimulus package, which saw the interest rate cut to a record low of 0.25%, its quantitative easing (QE) programme increased – which sees the bank print money to buy government bonds – by £60 billion to £435 billion, and began a £10 billion corporate debt purchasing scheme.
PwC’s Skyval Index, which gives a snapshot of the health of the UK’s 6,000 defined benefit pension funds, shows that the deficit peaked at £710 billion at the end of August before staging a slight recovery in the final months of the year.
By the end of December, that shortfall was still £90 billion higher than the start of 2016, posing a major issue for companies offering defined benefit schemes to their employees.
A number of companies have seen the size of their pension deficit inflate drastically, with BT recently revealing that its pension deficit had surged to £9.5 billion at the end of September from £6.2 billion only three months earlier.
Royal Mail also said it pays out £400 million in pensions contributions each year and expects that total to more than double to more than £1 billion after March next year.
