UK deficits 'halved' to £50bn
Consultants Hewitt Bacon & Woodrow says that UK pension scheme deficits “will have been halved” due to favourable markets – but warned that schemes are not yet fully out of danger.
The firm, part of US-based Hewitt Associates, now estimates that the total deficit of companies in the benchmark FTSE 100 index is now less than £50bn (E71.8bn).
A year ago the figure was put at more than £100 bn on an FRS17 accounting basis, Hewitt says.
“At last there is a sliver of good news for pension schemes,” says principal consultant Raj Mody. “Investment market changes over 2003 will mean that balance sheet pension deficits for leading companies will have halved overall since the worst point of the year.”
“Although 2003 was a good year for the financial health of most pension schemes, it’s important to note that they are not out of the woods yet,” He adds that while assets are invested mainly in equities, schemes could still see a dramatic reversal of fortunes.
Mody says trustees need to get together with plan sponsors to “think about whether to lock into their current position, by investing in bonds, or whether to continue to take the risk with equities in the hope of further gains”.