UK - Scheme funding at Britain's top firms has improved by more than 20% in the past six months, research from Dresdner Kleinwort Wasserstein shows.
DrKW found the combined deficit for FTSE100 companies under the international accounting standard – IAS19 – had fallen 22% to £48.9bn during the period March to September 3.
But DrKW said firms with cyclical stocks – such as car manufacturers – only saw a slight fall in their schemes’ deficits.
It pointed out that while Rolls Royce’s market capitalisation had trebled to 3145 over the past seven months, its deficit had improved marginally, falling from £1.8bn to £1.5bn.
DrKW European and UK equity strategist Karen Olney explained: “Investors are putting a lot of faith in the economic recovery/restructuring to justify these market moves.
“While pensions are not everything, it could be that the market has over-reacted, or under-reacted to the change in pension fortunes.”
Other examples include hotel giant Hilton, which saw its £111m deficit fall to £98m, while defence manufacturer BAe’s deficit fell from £3.1bn to £2.8bn.
He added: “If cyclicals are especially exposed to pensions, any market setback could cause a very rapid unwinding of values in those overly exposed stocks.
“If the recovery is not as strong as prior recoveries, such as 1987 and the early 1990s, investors may be heading for some disappointment.”
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