US - The pension deficits among major US companies are expected to increase by 65% by the year-end without contribution hikes or improved market conditions, according to Aon.
Conversely, liability increases of 10% in the UK have been offset by marginally higher pension scheme asset growth, the firm said.
Aon said deficits among those companies in the Fortune 100 could rise to US$129bn by December, up 65% on the previous year.
The key factors attributed to this predicted sharp rise were: a nine basis point drop in the discount rate, which increased liabilities by 1.5%; lower than expected investment returns on stocks and bonds in October and low cash contributions of $20bn, $15bn less than last year.
Aon also noted low employer contribution levels.
“It is clear the US deficit levels have been highly susceptible to change in recent months - ranging from 79% to 91% funded from December 2004 to October 2005,“ said Brad Klinck, senior vice president, Aon.
“We expect this volatility to continue for the rest of the year. Tragically, the lower corporate funding is in many cases being caused by government policies and the concern that potential changes to the US funding rules may effectively penalise plan sponsors that contribute this year.”
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