Pension deficits in FTSE250 companies fell from £74 billion ($137 billion) to £64 billion over 2003 according to research by Mercer Human Resource Consulting.
Tim Keogh, European partner at Mercer comments, ?more companies now realize that deficits will not go away by themselves. They are gritting their teeth and recognizing the need to increase contributions. It would be great if equity markets suddenly boomed again or if bond markets offered the higher long-term yield that would make deficits disappear. But sensible financial planning need to be based on more than hope, and the markets are likely to address only part of the problem.?
Pension deficits have become an increasing concern for companies in the context of M&A activity, because the added liability could affect the deal value. Investors hope that the introduction of the UK government Pension Bill in two weeks will clarify matters. The effects and implications of this are discussed in greater detail in the Market Focus section of the July issue of CF.
Optimism is also starting to filter through from senior executives in charge of pensions at FTSE 350 companies. Recent research by conducted by Consensus Research on behalf of Aon Consulting, a UK based insurance broker, highlighted that more than three quarters (77%) are confident that deficits will improve for their company?s pension funds over the next three years.