LONDON, 1 November 2006 - UK pension scheme deficits continue to bob around the £50 billion level for the third consecutive month as improved asset valuations are cancelled by growing liabilities. Similarly, FTSE-100 company scheme deficits have stabilised at around £40 billion in the last three months.
This analysis comes on the back of research by Aon Consulting, a leading pension, benefits and HR consulting firm, who provide a monthly tracker of the scheme deficits of the UK’s 200 largest defined benefit (DB) schemes, including all of those in the FTSE-100.
Based on the market movements in October, the total estimated deficit for the 200 schemes in Aon’s survey was £52 billion at the end of October 2006 compared with £51 billion at the end of September 2006, and £72 billion as at the end of 2005. The projection of the deficits is shown graphically below:
According to Aon, the main two factors influencing the deficit have been:
- A rise of almost 3% in equity markets would have reduced the deficit by around £7 billion.
- The fall in bond yields of around 0.1% would have increased the deficit by around £8 billion.
Comparative figures for the FTSE-100 companies since the start of the year are as follows:
| Date |
Total deficit under FRS17 |
| 31 December 2005 |
£58 bn |
| 31 January 2006 |
£61 bn |
| 28 February 2006 |
£58 bn |
| 31 March 2006 |
£37 bn |
| 30 April 2006 |
£24 bn |
| 31 May 2006 |
£42 bn |
| 30 June 2006 |
£32 bn |
| 31 July 2006 |
£32 bn |
| 31 August 2006 |
£40 bn |
| 30 September 2006 |
£40 bn |
| 31 October 2006 |
£41 bn |
Commenting on these latest results, Andrew Claringbold, Principal at Aon Consulting said,
“Over the last five months, the FRS17 deficit has remained largely unchanged reflecting the relatively stable conditions in investment markets. The improvements in deficit levels enjoyed in the first quarter of this year have largely been protected as the end of 2006 draws closer.
“FRS17 pension deficits for UK companies reached an all time high at the backend of 2005. Despite recent improved performance in equity markets, companies cannot afford to become complacent and should be regularly reviewing their investment and benefit strategies to ensure they are appropriate.”
Notes to editor:
About Aon
About Aon Consulting
Aon Consulting is a leading human capital consultancy, helping organisations of every size to attract and keep the employees they need. We advise on all aspects of employment, including health-related insurance and risk; employee compensation and pensions; human resource strategy planning; job design and change management; and staff assessment and legal issues. Aon Consulting is a division of Aon, one of the UK’s largest insurance brokers and providers of risk management services and a major force in reinsurance and the UK human capital consulting market. Aon Consulting Limited is authorised and regulated by the Financial Services Authority.
Aon Corporation is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting. There are 46,000 employees working in Aon's 500 offices in more than 120 countries. Backed by broad resources, industry knowledge and technical expertise, Aon professionals help a wide range of clients develop effective risk management and workforce productivity solutions.
This press release contains certain statements related to future results, or states our intentions, beliefs and expectations or predictions for the future which are forward-looking statements as that term is defined in the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from either historical or anticipated results depending on a variety of factors. Potential factors that could impact results include: general economic conditions in different countries in which we do business around the world, changes in global equity and fixed income markets that could affect the return on invested assets, fluctuations in exchange and interest rates that could influence revenue and expense, rating agency actions that could affect our ability to borrow funds, funding of our various pension plans, changes in the competitive environment, our ability to implement restructuring initiatives and other initiatives intended to yield cost savings, our ability to execute the stock repurchase program, changes in commercial property and casualty markets and commercial premium rates that could impact revenues, changes in revenues and earnings due to the elimination of contingent commissions, other uncertainties surrounding a new compensation model, the impact of investigations brought by state attorneys general, state insurance regulators, federal prosecutors, and federal regulators, the impact of class actions and individual lawsuits including client class actions, securities class actions, derivative actions, and ERISA class actions, the cost of resolution of other contingent liabilities and loss contingencies, and the difference in ultimate paid claims in our underwriting companies from actuarial estimates. Further information concerning the Company and its business, including factors that potentially could materially affect the Company’s financial results, is contained in the Company’s filings with the Securities and Exchange Commission.
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