UK - The pension deficit of FTSE 100 companies has gone down by nearly £12bn (€17.2bn) in July, while liabilities fell by about £6bn, according to consulting firm Watson Wyatt.
The outcome, which Watson Wyatt said was the best since October 2003, is due to the 3% rise in equity markets in July, said Stephen Yeo, a senior consultant at Watson Wyatt.
Higher employer contributions to pension schemes have also been instrumental in the improvement, although their impact will be more visible in the long term, the consultant said.
“The FRS17 measure of deficit fluctuates, it is a mark-to-market measure and the market does strange things,” Yeo said.
“Over the long term, the main effect is going to be caused by extra contributions.” He added that companies are putting “record amounts” into schemes.
A Watson Wyatt estimate based on figures produced by the Office for National Statistics suggests that contributions to all company pension schemes amounted to £22.5bn in 2004, compared with employee contributions of £4.1bn.
But Yeo said the deficit was “virtually unchanged” over the first seven months of 2005 because falling bond yields increased the value of liabilities, as measured by FRS17, by almost the same amount as assets have risen.
He also pointed out that falling real returns and rising longevity mean the cost of pensions had risen.
“Some companies have increased the contributions required from members, but these figures show that company pension schemes are now worth more than ever to employees,” Yeo said.
Earlier this week, US-based Watson Wyatt & Co. said it had completed its acquisition of UK-based affiliate Watson Wyatt LLP.