UK firms cut pension deficits by one-third in 2006

The UK’s top firms reduced their pension scheme deficits by more than one-third in 2006, research has revealed.

Mercer HR Consulting found that shortfalls in funds across the FTSE 350 fell by 29% last year to £61bn.

The reduction in pension deficits will be welcome news to employers, who collectively bear the cost of claims on the Pension Protection Fund, as well as employees.

However, the large increase in deficits in 2005 means aggregate deficits are only one-fifth below the levels they were at on 1 January 2003.

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Tim Keogh, worldwide partner at Mercer, said: “Rising funding levels are good news for pension scheme members, but the underlying longevity and investment risks remain significant issues for sponsoring employers.

“There has been little change in relative risk levels over the past four years.”