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Pension funds still set longevity too low – PCS

UK - Pension liabilities of the top 100 London-listed companies could be underestimated by as much as £40m (€57.5m), risk management firm Pension Capital Strategies (PCS) is convinced.

PCS suggests, in its latest quarterly report on the FTSE 100 companies and their pension disclosures, longevity assumptions need to be increased "by about one to three years" to be accurate.

"Companies need to take a more detailed look at the life expectancy figures that they are applying to their pension scheme to avoid future problems," said Charles Cowling, managing director of PCS.

These changes could add as much as £40m to the companies' pension liabilities, which have at least decreased lately, thanks to good returns and changes in the investment strategy.

"In the last 12 months, the total disclosed pension liabilities of the current FTSE 100 companies have fallen slightly from £392bn to £390bn," Cowling explained.

The report found "the total deficit of FTSE100 pension schemes at 30 September 2007 is an estimated £2bn, an improvement of £44bn from one year ago".
 
PCS believes one reason for this improvement is the increased matching of investments and liabilities.

"Ten FTSE 100 companies reveal that they have increased bond allocation by more than 10% over the period since their previous accounts," it noted.

At least 18 companies in the FTSE100 group disclosed a pension surplus in their most recent annual report and accounts, while 75 companies showed a pension deficit.

If you have any comments you would like to add to this or any other story, contact Barbara Ottawa on +44 (0)20 7261 4618 or email barbara.ottawa@ipe.com

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