Plunging Gilt yields following the unexpected Referendum result have caused pension scheme liabilities to jump, today’s data indicated.

Tom McPhail, head of retirement policy at Hargreaves Lansdown, said: “The UK’s gold-plated pension system is starting to look tarnished. Deficits are soaring, employers are reneging on their promises and still more money is needed.

“Companies are having to divert profits into schemes to make good on their promises, which means less investment capital to help businesses grow and less money available to invest in the pensions of younger workers.

“Accrued pension rights have to be respected and investors have to be able to trust the system, however there is also a growing argument for the Government to look at finding a more balanced approach to the retirement funding needs of UK workforce.”

Highlights from The Pension Protection Fund data:

• The aggregate deficit of the 5,945 schemes in the PPF 7800 Index is estimated to have increased over the month to £383.6 billion at the end of June 2016, from a deficit of £294.6 billion at the end of May 2016.
• The funding ratio worsened from 81.5 per cent to 78.0 per cent.
• Total assets were £1,363.4 billion and total liabilities were £1,747.0 billion.
• There were 4,995 schemes in deficit and 950 schemes in surplus.

There is a substantial discrepancy between the levels of contributions paid by employers for the benefit of final salary scheme members compared to money purchase scheme members, Mr McPhail said.

He cited ONS figures which showed:

• for defined benefit schemes, the average total contribution rate was 20.9% of pensionable earnings, 5.2% for members and 15.8% for employers
• for defined contribution schemes, the average total contribution rate was 4.7%, 1.8% for members and 2.9% for employers