The Pensions Regulator says that the UK's companies £130 billion pension deficit could be paid off within the next 10 years, with minimum disruption to the economy.
It believes that up to 80% of companies could close their deficits without facing more than a 25% reduction to their free cash flow. But they have been criticised as they rely on FRS 17 (a pensions acounting and valuation standard) and benefit buyout costs to gauge funding requirements, using actuarial discretion to calculate deficits, saying that it gives trustees and members an unreal idea of the security of pensions.
The regulator also admits that there is a flaw in the system, as mortality rates can be adjusted to reduce liabilities.
Our view
As ever, who is going to pay? We believe Final Salary Company Pension Schemes will be the domain of "State" funded organisations only.