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The Actuary The magazine of the Institute & Faculty of Actuaries

Hope springs eternal

The total pensions deficit across all FTSE 100 companies could be wiped out by the end of 2004, based on an analysis of investment bank equity and bond market forecasts by leading pensions advisers Aon Consulting.

According to Aon’s analysis of consensus forecasts for equity and bond markets, the overall pensions deficit for the FTSE 100 fell from £65bn in December 2002 to £56bn at the end of August 2003. If the market follows the trend set out by equity market strategists and hits 4,900 points by the end of 2004, the overall pensions deficit will be reduced to £41bn. However, if this market rise is also combined with a increase of 0.5% in long-range corporate bond yields by the end of 2004, then Aon predicts that the current overall pensions deficit for FTSE 100 companies should be almost completely wiped out by this time.

In addition to more upbeat market forecasts, cautious optimism is starting to filter through from senior executives in charge of pensions at FTSE 350 companies. Recent research among executives by Aon Consulting highlighted that more than three-quarters (77%) are cautiously confident that things will improve for their company’s pension funds over the next three years.