The gaping hole in corporate pension funds has been exacerbated by the recent drop in UK long bond yields, which are used to discount the value of future pension liabilities. In order to eliminate their pension fund deficits, firms are likely to have to divert a significant proportion of their resources into pension fund contributions over the next ten years or so. This could have a potentially devastating effect on business investment and the prospects for a re-balancing of the UK economy.
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