This month saw the end of an era in British corporate life. After decades of sending its employees to the most dangerous corners of the globe in search of oil — with only the thought of their families and the promise of a guaranteed income in their declining years to sustain them — Shell U.K. became the last FTSE 100 company to announce that it was closing its final salary pension scheme to new members. People joining in the future would no longer receive a fixed income based on their pay rate at retirement. 

Only days later observers were reminded of why final salary and other defined benefit schemes are on their way out. The Pension Protection Fund, which is charged by the British government with keeping defined benefit schemes sufficiently funded, revealed a record combined shortfall for U.K. schemes of £277 billion at the end of December — more than four times higher than a year before.

Over the past decade U.K. pension funds have been hit first by unfavorable tax changes, then by plunging equity markets and finally by a rise in the value of U.K. government bonds. This has increased the present value of their liabilities, which is calculated using a discount rate based on gilt yields. Many companies have concluded that making up the shortfalls is too costly — leaving closure as the best option.

Shell’s scheme is — in contrast to many — in rude financial health: its last valuation showed a surplus. However, the company said the decision was taken “to reflect market trends in the U.K.”, notably the trend towards closing defined benefit programs to new hires. Shell no longer wanted to be the odd one out.

Despite this trend, Shell and many other U.K. blue chips still face the headache of meeting hundreds of billions of pounds of future commitments to workers who had already signed up for the defined benefit schemes before they were closed.

Analysts argue that most pension funds can afford to take a longer view of how to achieve this than many other institutional investors since their liabilities are stretched out over decades. In the aftermath of past recessions, this thought would have provided solace. After a few bumpy years, the world’s different asset classes were prone to return to their normal growth patterns, allowing a pension fund manager to make decent returns from a prudently diversified portfolio if given enough time.