LONDON Oct 17 British businesses have shown
little sign of creating fewer jobs or investing less as a result
of growing pension liabilities but the rules governing such
funds may need to be tweaked, Bank of England deputy governor
Ben Broadbent said on Monday.
Broadbent was speaking to a parliament committee which is
investigating the future of ailing defined-benefit pension
schemes, under which employers guarantee to pay staff a fixed
percentage of their salary after retirement.
A fall in interest rates over the past 20 years has led to
concern that some businesses may be unable to fund future
promises without cutting other areas of spending.
Broadbent said there was little sign that companies with big
pension deficits were behaving very differently to those without
such shortfalls, and he said there were reasons to expect the
financial position of pension funds to improve.
"Looking at the evidence we don't see - we haven't found,
despite looking - great evidence that these deficits are really
affecting their behaviour, whether it is over investment or over
employment," he said.
Broadbent said the problem of defined-benefit pension funds'
finances had been aggravated by the outperformance of bonds over
equities in recent years - a trend he did not think was
sustainable and would reverse over the next two decades.
Broadbent also said it was possible that the rules which
govern defined-benefit pension funds could be tweaked to reduce
pressure to invest in costly, lower-yielding government debt
rather than equities or other higher-yielding assets.
"I do wonder if the regulation isn't herding people to a
situation where ... you are being forced at the level of the
system into this (lower-yielding) thing," he said.
"That is an advantage at the margin for a government issuing
debt, but it may not be the right decision for society as a
whole," he added.
(Reporting by David Milliken; editing by William Schomberg)