Tuesday 14th August 2007
Pensions deficits in the UK have closed in the past year, according to new research.
A survey conducted by consultancy Lane Clark & Peacock (LCP) shows a net surplus among FTSE 100 companies of £12 billion as of mid-July 2007.
This is supported by the latest PPF 7800 Index from the Pension Protection Fund (PPF), which saw a year-on-year return to positive holdings.
According to the PPF, the level of surplus among 7,783 defined benefit pension schemes in the UK was £51 billion at the end of July.
This compares with a £31 billion deficit at the same point in 2006.
Commenting on the FTSE 100 results, LCP partner Bob Scott says: "It is encouraging to see UK pension schemes of FTSE 100 companies report a surplus after so many years in the red.
"However, the surplus may not survive once companies reflect the latest mortality projections in their accounts."
While the LCP report notes the first return to profitability for FTSE 100 pension schemes since 2002, the picture drawn by the PPF is less promising.
Despite the year-on-year rise in funds, a monthly fall of £48 billion - nearly half of all money held in pension schemes - was detected among the 7,783 companies surveyed.
This left total available funds at the July figure of £51 billion, compared with £99 billion at the end of June 2007.
The PPF blames the decrease in company assets on the poor performance of equity markets, which fell by about 2.4 per cent over the course of the month.
LCP echoes the sentiment, suggesting that FTSE 100 firms may have seen their liabilities rise as a result of weak market performance.
Mr Scott adds: "Companies whose pension schemes remain heavily invested in equities run material investment risk."
"UK pension schemes are not out of the woods yet," he concludes.
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