Birmingham Chamber of Commerce has launched a 14-year recovery plan to slash the deficit on its final salary pension scheme – which mushroomed by £680,000 in 12 months.

Chamber bosses pinpoint the Bank of England’s quantitative easing programme as a key factor in the growing shortfall, reducing gilt yields.

Chamber executives have now drawn up a new financial blueprint following an agreement with the fund’s trustee on future funding. Contributions of £120,000 a year are currently being paid into the fund, which has 169 pensioners and deferred members.

The scheme was closed to new entrants in September 2002 while accrual of future service benefits ceased from September 1 2007.

The sharply widening deficit is revealed in the chamber’s latest annual accounts for the year to March 31 2012, which also disclose that the group’s income for the year of £8.4 million was £2 million lower than for the previous 12 months.

A separate 2012-15 business plan to increase membership is also revealed in the accounts, which warn that issues of cashflow and costs remain “a challenge.”

Mike Hibbert, Birmingham Chamber of Commerce Group finance director, said: “The increase in the pension fund deficit we have suffered is common to many businesses and organisations.

“The quantitative easing programme introduced by the Bank of England has reduced gilt yields and because these are used to set the discount rate used to value pension fund liabilities they increased significantly.

“This caused our year-end deficit as measured under financial reporting standards to increase from £304,000 to £984,000. It should be noted that the disclosures required under the reporting standard do not reflect the long-term nature of the scheme and its liabilities.

“You could even say it’s a false picture and the impact is out of our control. The important point is that we have agreed a recovery plan and a funding level with the scheme trustee which will eliminate the scheme deficit within an acceptable period.”

On the business plan, the annual report states: “BCCI’s 2012-15 business plan has reaffirmed the group chambers’ commitment to increasing their membership by improving the offer to members.

“In order to do this the group has to be successful financially and so we will continue to pursue commercial opportunities. Dealing with the issues of cashflow and costs will remain a challenge.

“The critical issue of cashflow and working capital availability will continue to dominate the first 12 months of the three-year plan but this will be eased as surpluses are generated from the chamber’s lower cost base.

“BCCI will continue to reduce the funding deficit in the final salary pension scheme and solutions will be sought to release value from the chamber’s property, which remains to be the company’s biggest asset.”

In a review of the business, the report states: “The group’s income for the year of £8.4 million was £2 million lower than in the previous year, mainly as a result of reduced funding for business support and training which was £1.4 million lower.

“Subscriptions from members and patrons showed a £50,000 increase during the year.

“The chamber is now benefiting from significant annual cost savings as a result of the £259,000 spent on reorganisation over the last two years.”

At March 31, 2012, total group membership stood at 2,762, a fall of 147 from the previous year. No bonus payments were included in 2012 staff costs.