UK - Scheme deficits at 200 of the UK's top firms could be erased in less than two years if markets rise and bond yields improve, Aon Consulting claims.
It says the total FRS17 deficit at the UK’s top 350 firms was £55bn at the end of June compared with £80bn a year earlier.
Aon attributes the improvement to increased corporate bond yields, improving markets and increased employer contributions.
Aon says improved investment returns took £6bn off UK PLC’s FRS17 deficit, while £11.5bn of employer contributions – up from the £7.5bn contributed by employers in 2002 – cut the deficit by £4bn. The biggest factor behind the recovery was improved bond yields, which took £15bn off the deficit.
Aon principal Andrew Claringbold said: “The consensus is that the FTSE100 will end up at 4850 in a year’s time, while bond yields will go to 6.05%.
“If this happens, the aggregate deficit will be just under £30bn by June 2005.
“But if corporate bond yields hit 6.5% and the FTSE100 reaches 5000 by end of 2005, that will get rid of the overall deficits.
“But if I was a company, I wouldn’t rely on that happening.”
Aon surveyed more than a dozen investment houses and Claringbold said that if their forecasts were accurate, FRS17 deficits could be cleared within two years.
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