UK Money News
1st July 2008
Company pension schemes hit by stock market declines
Blue chip company pension funds fell back into deficit last month, after suffering sustained losses.
According to figures from Watson Wyatt, FTSE 100 company pension funds had an aggregate surplus of £23 billion during May.
At the end of June, however, this had become a deficit of £8 billion.
The losses mean that the schemes' aggregate funding position has slipped by almost £50 billion over the last three months.
The downturn has been driven by poorly performing stock markets, with the bourse in which most of funds invest their assets - the FTSE All Share Index - down lost nearly ten per cent during June.
Higher inflation expectation also damaged the funds, by driving up the cost of guarantees for holders of defined benefit pension schemes.
Rashpal Bhabra, head of corporate consulting at Watson Wyatt, said: "Companies with defined benefit pensions have offered their staff protection against prices rising in future but have limited protection against this themselves.
"Some [schemes] who could have hoped to report a pension surplus a few weeks ago will have to report a deficit instead."
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