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FTSE 350 pensions deficit 'increases by £9 billion in February'


Survey puts increase down to changes in the corporate bond yield index

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Pensions deficits increased by £9 billion among FTSE 350 companies in February despite rising equity markets, a report claimed on Wednesday.

Mercer's pensions risk survey showed that the aggregate IAS19 measure of FTSE350 defined benefit pension schemes' deficits stood at £92 billion at 29 February 2012. This compares with £83bn at 31 January 2012 and £84 billion on 31 December 2011.

The asset values of the firms increased to £494 billion in February, from £478 billion in December. However, the yield on the corporate bond yield index fell, resulting in the increase.

"Not only are Government bond yields at historically low levels but the extra yield on corporate bonds is coming down. This could push up the liability calculations," said Ali Tayyebi, senior partner and pension risk group leader.

"However, bond yields at longer durations have not fallen. This means that some companies who have taken this fully into account could have seen a reduction in liabilities over the month. We expect to see developments in the approaches companies adopt for valuing pension scheme liabilities in their accounts when the end of December accounts are published."

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FTSE 350 pensions deficit 'increases by £9 billion in February'
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