UK - FTSE 100 pension deficits have hit a five year low, according to a report put out by Deloitte.
Deloitte's analysis of the pension deficits of the UK’s top 100 companies showed the total deficit for defined benefit (DB) pension plans was £21bn, the lowest deficit for more than five years. Deloitte estimated that 25% of the FTSE 100 companies now had a surplus in their schemes relative to the value of their accounting liabilities.
The analysis claimed the first three months of 2007 had been a ‘rollercoaster ride’ for pension scheme deficits: for example, in the last week of February deficits rose by £20bn as world stock markets fell dramatically. However, a combination of a recovery in the stock market and a fall in the price of the bonds has reduced deficits to a five year low.
Deloitte pensions partner David Robbins said: “For the first time since 2001, we are starting to deal with schemes which have surpluses. Surprisingly, a surplus can be a headache for the company as it is near impossible for the employer to take a refund from a pension scheme.
"Many companies have now closed their schemes so may find it increasingly difficult to use up the surplus. The surplus could effectively become stranded”.
Research put out by Aon Consulting at the same time showed after three years of relatively stable UK pension scheme deficits, the last 12 months had seen significant levels of volatility when measured under the FRS17 accounting standard.
Aon also highlighted the turmoil in markets originating in China in February, which had the highest single-day increase (£11bn) in deficits under FRS17.
The Aon research supported Deloitte's view that the last 12 months had seen UK pension deficits improve by 45%. It said the steady improvement in FRS17 deficits over the last two years, however, hid underlying volatility.
Aon Consulting senior consultant and actuary Marcus Hurd said: "Most companies with March year ends are expected to report substantial improvements in their pension scheme deficit. The UK pension scheme deficit is £26bn at 31 March, which is a £22bn improvement on the previous year. The FRS17 accounting standard, however, uses a single day point estimate, which fails to acknowledge underlying volatility."
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