UK - Pension fund deficits for FTSE 100 companies have fallen to £31.8bn as of 31 January 2007 - the lowest level since records began, Watson Wyatt has claimed.
Stephen Yeo, senior consultant at the consultancy, said: “Most of the fall in deficits was due to increases in bond yields, which rose by 0.15% in January and now stand at their highest level since March 2005.
"Another positive influence has been the strong performance of shares, where around 60% of company pension scheme assets are invested. Share markets remain close to the highest level they have reached since the current accounting standard was introduced in 2002.”
The previous lowest figure since the FRS17 accounting standard was introduced in 2002 was £34.3bn in April 2006. At their highest, deficits were £90bn in March 2003. Deficits fells by £8.2bn last month, following a reduction of £14.1bn in December.
Yeo added: “Provided that investment markets do not experience adverse shocks, we expect deficits to reduce further during 2007 as companies continue to make significant deficit-reduction contributions."
Commenting on the Watson Wyatt report, John Cridland, deputy director-general of the Confederation of British Industry (CBI), said: "It is good news that pensions fund deficits are shrinking. However, companies remain under great pressure to cut their deficits further and the Government must not hobble their efforts.
"In particular, employers are concerned at the rising cost of the Pension Protection Fund levy on companies - it is more than twice the original estimate at £675m a year and comes on top of their payments into their own pension funds. The PPF board must be wary of placing too hefty a financial burden on firms.”
In other UK pension deficit news, buyout firm Synesis Life, which was launched last May by Isabel Hudson as a provider of bespoke solutions to the pension and annuity liabilities marketplace, has appointed Watson Wyatt’s Daniel Harrison senior pension actuary.
Harrison has over 17 years experience at Watson Wyatt advising companies and trustees in relation to a wide range of pension and benefit issues.
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