UK - Total buyout solvency deficit of FTSE 100 pension schemes has improved by £90bn (US$179bn) during the last 12 months, a report by Pension Capital Strategies Limited (PCS) has shown.
The report, published today by PCS in association with Numies Strategies, also estimated the combined deficit in FTSE 100 pension schemes stood at £8bn at 30 June 2008, which represented a deterioration of £12bn from a £4bn surplus 12 months ago.
Charles Cowling, managing director, PCS, said the improvement of total buyout solvency deficit was due to insurance company prices becoming significantly more competitive with the arrival of several new entrants to the market.
Cowling said: "The PCS Buyout Market Watch, July 2008, indicates that many more buyouts are expected to materialise in the next 18 months."
PCS claimed there was significant evidence emerging of moves in the last year to reduce the mis-matching of assets to liabilities.
Charles Cowling explained: "Fourteen FTSE 100 companies increased their bond allocations by more than 10%, with Rolls-Royce alone switching more than £3bn into bonds.
"Overall, the average pension scheme asset allocation to bonds has increased from 35% to 40% in just 12 months. This represents the largest 12-month shift in investment strategy for 20 years."
He added the total amount contributed to FTSE 100 company pension schemes in their last financial year was £12.6bn, down from £14.3bn in the previous year.
Cowling said new IAS19 guidance (IFRIC14) could dramatically affect pension surpluses or deficits published in 2008 accounts.
He concluded: "For many companies, pension funding positions have improved, so the financial significance of pension scheme deficits has reduced.
"However, British Airways, Invensys, BT, ITV, Royal & Sun Alliance, FirstGroup and BAE Systems all have total pension liabilities greater than their equity market value."
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