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The pensions crisis

The most obvious effect of ultra-low yields is that they have pushed defined-benefit schemes into big deficits. The Pension Protection Fund estimates that, at the end of June, the combined deficit of the 5,945 schemes it covers was £383.6bn; in 2011 the schemes were in surplus. This runs the risk that firms will close even more final salary schemes, or hold down either wages or dividends to reduce these deficits - responses which will hurt all savers.

You might object that these deficits are an artefact of accounting rules: low gilt yields mean that the discounted present value of schemes' future liabilities is enormous.

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