PCS survey shows deficit narrowing

Pension Capital Strategies Limited (PCS) says the total buyout solvency deficit of FTSE100 schemes - the amount needed to secure members benefits in full with an insurer - has improved to an estimated £110 billion from £200 billion 12 months ago.

A PCS survey of analysts’ views on pensions shows that 72 per cent of analysts in the survey were neutral to such moves, despite the apparent cost. The PCS Buyout Market Watch, July 2008 indicates that many more buyouts are expected to materialise in the next 18 months.

Charles Cowling, managing director of PCS, says, “In part, this is due to insurance company prices becoming significantly more competitive with the arrival of several new entrants to the market.”14 FTSE 100 companies increased their bond allocations by more than 10 per cent, with Rolls-Royce alone switching more than £3 billion into bonds. Overall, the average pension scheme asset allocation to bonds has increased from 35 per cent to 40 per cent in just 12 months.”