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Fund deficits have been cut by 40%

by James Salmon

UK pension fund deficits have already been slashed by 40 per cent this year, according to Aon Consulting.

Deficits fell by around 10 per cent in November alone due to a small increase in bond yields and flat equity markets. Overall, deficits are around 40 per cent lower than they were at the start of the year.

The analysis comes on the back of research by Aon Consulting, which provides a monthly tracker of the scheme deficits of the UK’s 200 biggest defined-benefit schemes, including all those on the FTSE 100.

Based on the market movements in November, the total estimated deficit for the 200 schemes in Aon’s survey was 46bn at the end of November compared with 52bn at the end of October and 72bn at the end of last year.

The latest prediction may help to calm concerns that the new, more rigorous FRS17 disclosure regime would cause many people to panic at the size of the pension deficit and transfer out of defined-benefit schemes.

Aon Consulting principal Andrew Claringbold says: “This is great news for UK companies as at the back end of 2005, pension deficits under FRS17 had reached an all-time high.

“However, while the markets continue to perform well, UK companies cannot afford to become complacent and should be regularly reviewing their investment strategies to ensure that their deficits do not reach the peaks achieved during 2005 and early 2006.”

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