LONDON Jan 14 The shortfall in Britain's
private sector pension plans hit its lowest since June 2011 last
month, potentially freeing up cash for firms to increase
investments which the Bank of England says are the key to a
sustainable economic recovery.
The aggregate deficit for 6,150 final salary pension schemes
dropped to an estimated 27.6 billion pounds ($45.2 billion) in
December from 59.7 billion pounds in November, according to data
from the Pension Protection Fund, a watchdog.
A rise in bond yields and share prices strengthened the
funding position of pension schemes, a PPF spokesman said.
The deficit was as large as 221.2 billion pounds in December
The PPF was created in 2005 to take over the assets and
liabilities of UK-based defined benefit pension schemes if an
employer goes bust.
Michael Saunders, economist at Citi, said the narrower
shortfall paved the way for lower contributions in future.
"Rising pension contributions have been negative for
investment. The drop in deficit feeds through into lower
contributions and that should help business investment,"
Bank of England Governor Mark Carney has said a pickup in
business investment is crucial if Britain's unexpectedly strong
economic recovery of last year is to get on to a firmer footing.
Yields on 10-year UK gilts rose more than 100
basis points in 2013 while the UK stock market rose more
than 14 percent.