UK - FTSE 100 pension scheme deficits fell by £11bn (14%) over two weeks in January, as the deficit dropped to £66bn on 31 January, from £77bn on 18 January.
Watson Wyatt, who reported the findings, said the drop highlighted the short-term volatility of pension deficits when measured by the FRS17 accounting standard, and added that deficits had in fact increased by £6bn over the whole month.
Stephen Yeo, a senior consultant at Watson Wyatt, said January had produced some of the biggest swings in the Pension Deficit Index since the firm had begun its calculations in June 2002.
“A feature of marked-to-market accounting standards is that deficits can vary a lot, even in the course of a few days. This should not be of concern as long as it is understood by users of company accounts. What would be of greater concern was if the Pension Regulator were to use FRS17 as a funding target, rather than an accounting measure,” he commented.
The Watson Wyatt calculations noted that share values had continued to increase while bond yields had fluctuated. This suggested there had not been a significant asset shift by pension funds, but that relatively small amounts of demand have met a bond market with little supply, added Yeo.
“However, over the long term we do expect bond allocations by pension funds to continue to rise, he predicted.
By Lisa Haines
The People's Pension, Atlas Master Trust and The Cheviot Trust have been granted authorisation from The Pensions Regulator (TPR), taking the total number of authorised master trusts to 18.
Pension schemes have been warned they may now face a more challenging legal test if they wish to fix drafting errors.
The Greene King Pension Scheme has appointed XPS Pensions as its actuarial and investment adviser following a competitive tender process.
Professional Pensions has compiled a list charting the progress of master trust authorisation. View our list in full here...