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Pension deficits fall to new low

02 February 2007

The pension fund deficits of companies in the FTSE 100 share index have fallen by nearly two thirds during the past four years, a study has found.

Actuarial firm Watson Wyatt calculates that their collective deficit has fallen from £90bn in March 2003 to £32bn this month.

The combined deficits of final salary schemes dropped by £14bn in December and £8bn in January.

The two main reasons were improved bond yields and rising share prices.

"Most of the fall in deficits was due to increases in bond yields, which rose by 0.15% in January and now stand at their highest level since March 2005," said Stephen Yeo, senior consultant of Watson Wyatt.

"Another positive influence has been the strong performance of shares, where around 60% of company pension scheme assets are invested.

"Share markets remain close to the highest level they have reached since the current accounting standard was introduced in 2002," he added.

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