Pensions gap widens by 8bn

The pensions funds of companies in the FTSE 100 have fallen by 8 billion to a deficit of 60 billion, according to the actuary Aon Consultancy.

15:04 10 November 2004

The pensions funds of companies in the FTSE 100 have fallen by 8 billion to a deficit of 60 billion, according to the actuary Aon Consultancy.

The firm recorded that despite an increase in the value of assets for the funds, an increase in long-term liabilities had inflated the deficit.

Andrew Claringbould of Aon explained: "The term of the pension scheme liabilities is so long that the liabilities are very sensitive to movements in long-dated gilt yields."

He added: "Despite equity markets reaching their highest levels for 27 months, the increase in the assets has been more than offset by an increase in liabilities as a result of the fall in long-term interest rates."

The negative outlook will not last, however, as most analysts expect the FTSE 100 to improve its results by the end of the year while corporate bonds will also increase, slashing the deficit by a third, or even dwindling it to just 5 billion if the higher-end predictions come true.