FTSE 100 pension schemes reached their biggest surplus in six years last month after rising to £40bn, according to actuary Watson Wyatt.
The surplus, which represents the largest since Watson Wyatt began monitoring UK pension schemes’ funding levels in 2002, rose from £29bn in February. As recently as February last year, FTSE 100 companies had a combined pension deficit of more than £45bn.
The actuary attributes the surplus to increases in corporate bond yields, although share prices dropped in March.
Chinu Patel, a senior consultant at Watson Wyatt, says: "Accountants use the yield on AA corporate bonds to calculate the present value of a stream of pension payments that stretches over several decades.
“The credit crunch continued to increase companies’ borrowing costs during March, thereby reducing the measured value of pension liabilities. This is the principal reason why surpluses increased from £29.2bn to £40.4bn despite this being a month in which pension assets were clearly badly affected by falls in equities. It underlines the volatility of pensions' accounting numbers."
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