UK - FTSE100 companies saw their pension surpluses rise to record heights on the back of rising inflation, while benefit payout increased only enough to maintain purchasing power of pensions, consultancy Aon has found.

Higher prices reduced the expected costs of pension liabilities in final salary defined benefit plans by around £10bn (€14.4bn) over the last year as most schemes target investment returns linked to inflation, Aon explained in its monthly FRS17/IAS19 tracker study.

Because most UK pension schemes do not award full inflation-linked pension increases, the benefit increase they pay to members is only a "real level" rise to maintain the purchasing power of pensions.

"This environment of higher inflation is easing the burden on UK pension schemes, because many schemes benefit from broadly inflation-related investment returns while paying out benefits that are not fully linked to inflation," commented Marcus Hurd, senior consultant and actuary at Aon Consulting.

The aggregated surplus of pension schemes in FTSE100 companies is currently £5bn compared to a deficit of £41bn a year ago. Funding levels were improved both by sinking liabilities and good returns.

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