Hopes rise of cut in pension deficits Companies might be able to slash the deficits on their pension schemes at the stroke of a pen after a consultation to be unveiled by chancellor George Osborne today. The chancellor will use his Autumn Statement to open a review of the methods companies use to assess the financial health of retirement schemes after complaints by business that low interest rates are artificially pushing final salary pension funds deeper into the red. This will focus on whether to change the approach the Pensions Regulator uses to calculate the size of shortfalls to one that would show deficits to be smaller than they are now. Such a change would allow employers to slash contributions. Final salary pension schemes currently work out how much they need to put aside to meet future payouts by assuming a realistic estimate of projected investment returns, a rate that is close to the yield on government bonds. The record low yields on UK gilts have made pension deficits soar as projected returns fall. Employers" groups have complained that rates are temporarily and artificially low. Under pressure from UK businesses, Mr Osborne will say he is willing to look at letting companies take a longer-term view of projected returns, industry and government officials say. The proposal will suggest that interest rates and asset values could be smoothed to reflect, say, the average values prevailing over the previous five years. The move has been opposed by the Pensions Regulator because of fears that companies would be putting the long-term health of their pension funds at risk. Stephen Soper, director for defined-benefit pensions at the UK's pensions regulator, said such an approach "risks simply picking the answer you want and ignoring the reality of the situation." The move also introduces a risk that companies would be confronted by sudden, unexpected deficits if the UK did not recover as expected. A Japanese-style "lost decade" of low growth could keep interest rates low for many years to come. The CBI, the employers" organisation, and the National Association of Pension Funds have both lobbied for the change. They note that pension regulators in other countries, including the US, the Netherlands, Sweden and Norway, have made the move.