UK - The deficit for final salary pension schemes of FTSE 100 companies fell by £35bn since the beginning of the year, according to Deloitte.
The deficit currently stands at £40bn and the improvement has been attributed to the falling prices in bond markets used to value pension liabilities.
Deloitte estimated the current value of FTSE 100 pension liabilities to be £40bn - the majority of which has been reflected on company balance sheets under new International Accounting Standards.
The firm calculated the lower prices of bonds typically used to benchmark pension liabilities have reduced the deficit by £35bn, after offsetting the effect of higher inflation.
Over the last few months many FTSE 100 companies unveiled plans to plug their deficit. However, according to Deloitte, this strategy was unlikely to significantly reduce the volatility of pension deficits on company balance sheets.
This would only happen if such plans were coupled with a widespread change in pension fund asset allocation.
David Robbins, consulting partner at Deloitte said: “Despite market movements since the start of the year, the cost of buying assets which match pension payments such as inflation-linked bonds is still relatively expensive and the assets are hard to come by.
“Cost issues aside, a poorly funded scheme will have insufficient funds to purchase the volume of ‘matching’ assets required relative to the current value of the liabilities making it difficult to stabilise the situation”.
By Angele Spiteri Paris
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