UK – The total pension scheme deficit for companies in the UK’s FTSE 350 index has risen by £18bn (€26bn) to £93bn, according to estimates from Mercer Human Resource Consulting.

It said deficits rose by 24% in 2005 despite strong equity market performance, according to research by Mercer Human Resource Consulting. “Projections for 31 December 2005 year-end accounts suggest that deficits increased from £75bn in 2004 to £93bn last year.”

Although pension asset values rose by around £60bn to £422bn, scheme liabilities grew by a similar amount, which increased the total deficit.

“Favourable investment performance did little to dilute the value of pension scheme deficits in 2005,” said Mercer partner Tim Keogh.

“Bond markets rose at the same time as equity markets, causing yields to drop and liabilities to grow. The need to allow for increased longevity has been an additional headwind.

Mercer calculated the figures on the basis of international accounting standards - which will be used for UK listed companies for the first time as at 31 December 2005.

The firm added that FTSE 350 companies account for around half of UK occupational pension schemes in terms of fund assets.

In 2004, FTSE 350 companies made contributions of around £5bn to reduce their pension scheme deficits. Mercer says anecdotal evidence suggests this figure won’t be radically higher in 2005.

Said Keogh said: “Our experience suggests that many companies have waited to find out the cost of their Pension Protection Fund levy and the strength of the new funding regulations before they revise their contribution plans.

“Despite some companies making substantial contributions in 2005, often to facilitate a major deal, we have yet to see the radical change in contribution strategy the Pensions Regulator is probably hoping for.”