UK - FTSE 100 companies' pension schemes had a net deficit of £41bn (US$80.1bn) at mid July this year compared to a £12bn (US$23.4bn) surplus in July 2007, a report by Lane Clark & Peacock LLP (LCP) has shown.
Bob Scott, partner, LCP, said: "UK pension schemes of FTSE 100 companies enjoyed a brief period of surplus until early in 2008.
"Some companies chose to spend their surpluses on various forms of de-risking activity including buy-out, purchasing financial swaps and reducing their exposure to equities.
"Events of the last year demonstrate the importance of assessing and managing pension risks and being prepared to take opportunities when they present themselves."
A report by Mercer showed a FTSE 350 companies' deficit of £47bn (US$91.8bn) at 30 June compared with a surplus of £14bn (US$27.4) in March this year. The funding level is now 90%, down from 103% in March.
Mercer said falling equity markets and increased inflation had resulted in a "marked increase" in exposure of FTSE 350 companies to their pension commitments.
Deborah Cooper, head of Mercer's retirement resource group, said: "For good reasons, many pension schemes still have significant investments in equities, but their volatility creates considerable uncertainty for their sponsoring companies.
"Employers should consult with trustees about the investment products available to mitigate the downside risks that equities and inflation impose on their scheme, and therefore on their balance sheet."
Cooper concluded trustees should be prepared to consider buyout of liabilities or other available alternatives to reduce balance sheet volatility. They also needed to be extra vigilant in keeping track not only of their pension scheme finances, but also the finances and covenant of their supporting companies, she added.
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