Pensions deficit halved as shares rise

The total deficit for final salary pension plans of FTSE 100 companies has halved in the past two months, according to professional services firm Deloitte. 

The total deficit now stands at £60bn – largely due to the recent gains from a buoyant equity market and easing of the pressure in bond markets from government proposals to lend over longer periods, it said.

In January, company pension deficits increased dramatically as demand from pension schemes for long-term bonds pushed up their price. This had the knock-on effect of pushing up the cost of meeting pension promises, and pension liabilities increased, peaking at about £110bn in mid-January.

Since January the FTSE 100 Index broke through the 6000 point barrier for the first time in five years. This means pension scheme assets have increased by more than £10bn since the start of the year.

David Robbins, partner in consulting at Deloitte, said: “The recent rise in the UK equity market has been good news for company pension schemes.

“However, deficit movements over the first three months of this year indicate how volatile company pension deficits can be. The key to controlling this risk is to choose investments which move closely in line with pension scheme liabilities.”

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