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Law360, London (April 2, 2020, 5:08 PM BST) -- British employers had a £290 billion ($354 billion) hole in their pension plans by the end of March, an increase of £120 billion since the start of the year, PricewaterhouseCoopers said Thursday, citing the coronavirus pandemic as a "significant factor."
A monthly index published by PwC showed the deficit of defined benefit pension funds rocketed from £170 billion in January. The consultancy said the deficit increased by £60 million over the last month alone, from £230 billion at the end of February.
PwC's Skyval index — which provides a health-check on the 5,800 U.K. corporate defined benefit schemes — said lower returns on investments pushed employers' liabilities up in January. And since then, the spread of COVID-19 and the resulting harm to global trade has hit the value of assets.
"COVID-19 is clearly a significant factor and throws up a range of things that those responsible for [defined benefit] pensions need to manage including, most importantly, ensuring that payments keep flowing to the 10 million people currently receiving pensions," Steven Dicker, chief actuary at PwC, said in a statement.
But the consultancy told U.K. businesses "not to overreact," pointing out that the deficit hit a lower point last summer, going down to £340 million at the end of August.
PwC also praised The Pensions Regulator's "pragmatic approach" to dealing with the crisis. The watchdog said in March that it would not take enforcement action against companies that fail to make contributions to workplace pensions over the next three months, in a bid to ease the burden on businesses already struggling under the coronavirus outbreak.
The guidance is part of a wider range of measures designed to offer struggling companies more flexibility and safeguard retirement savings. It also included giving defined benefit pension schemes the ability to put a hold on people transferring out their savings for three months, in order to protect members from market volatility and scams.
--Additional reporting by Martin Croucher. Editing by Marygrace Murphy.
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