UK - Pensions deficits at UK companies with the largest DB schemes reached an all-time high of £76bn in January 2006, with falls in long-dated gilts and bond yields blamed for the surge.
According to Aon Consulting, over the last 12 months the yield on over 15 year AA rated bonds fell by 0.6% (from 5.2% to 4.6%) and the real yield on over 5 year index-linked gilts also fell by 0.6% (from 1.7% to 1.1%).
Since 31 December 2005, the total pensions deficit of the 200 UK companies surveyed has increased from £72bn to £76bn. Aon believes the fall in long-dated bonds in January of around 0.1% would have increased the deficit by £7bn, however a 3% return on equities (for January) offset the increase by about £3bn.
Aon’s analysis indicated that the deficit has increased over the last 12 months ranging from around £59bn in March to £76bn in January. These movement have been attributed to the over 5 year index linked gilt yield reductions.
“The results would have been significantly different if we had measured our results on the 18 January 2006, when the over 5 year index-linked gilt fell to under 1%,” said Andrew Claringbold, principal at Aon Consulting.
“At this time, the total deficit was estimated to be £91bn before gilt yields recovered much of their fall.”
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