Falling gilt yields have pushed final salary pension funds 90bn deeper into the red since the second wave of quantitative easing (QE) started last October, pension experts said today.

The National Association of Pension Funds (NAPF) said the Bank of England’s printing of £125bn within the past six months had hit pension funds harder than expected – and will force businesses to divert money away from jobs and investment and into filling pension fund deficits. On the third anniversary since the start of QE, the NAPF called on the Pensions Regulator to change the way that pension fund liabilities are calculated, and to give pension funds more time to cover deficits. It also wants the Bank of England and the Regulator to make a joint statement explaining how the distortions caused by QE make pension deficits look artificially high.

Joanne Segars, NAPF Chief Executive, said: “Businesses running final salary pensions are being clouted by QE. Deficits that were already big now look even bigger because of its artificial distortions.” Pension funds want a stronger economy, so they are on board with the QE project for now. But the latest bout of £125bn of money printing has blown a £90bn hole in their side. We need help in managing that. Pension funds cannot be left holding the baby. Firms are legally obliged to fill the deficits, and that diverts money away from jobs and investment, and will lead to further closures of final salary pensions in the private sector. Retirees trying to get a good annuity are feeling the pain too and they are getting a fifth less than they would before QE started. We need to see stronger action from the authorities on this massive issue, which will hurt pension schemes for some time yet. And there is always the possibility of QE3.”