UK - A study by consulting firm JLT Pension Capital Strategies has found that the total deficit of FTSE 100 pension schemes fell from £68bn (€78bn) to £32bn in the year ending 31 March 2011.

JLT attributed the results to the number of companies disclosing a pension surplus, which has doubled from six to 12 over the year.  

The total deficit funding last year amounted to £11bn, with HSBC providing a deficit contribution of £1.8bn.

However, 72 companies in the FTSE 100 still have a pensions deficit, and the decline of defined benefit pensions continues, JLT said.

Charles Cowling, managing director, said: "Our research indicates that, despite FTSE 100 companies continuing to pour money into their pension schemes in an attempt to narrow deficits, 2011 will be the year that sees the death of final salary schemes.

"In the past 12 months alone, we have witnessed an underlying reduction in ongoing provision of 20%."

The consulting firm estimates that, after allowing for the impact of changes in assumptions and market conditions, the underlying reduction in ongoing defined benefit pension provision is approximately 20% in the last 12 months.

Pension schemes have also changed their investment strategy, with seven FTSE 100 companies increasing their bond allocation by more than 10% over the year.

Cowling said: "The flight into bonds continues, confirming that schemes are taking steps to reduce investment mismatching. We expect bond allocations - presently at 50% - to reach 75% within five years."

Meanwhile, Towers Watson has warned that pension funds should review their investment strategies to determine whether their assets would mitigate or exacerbate the impact of sponsor impairment following an extreme event.

Carl Hess, global head of investment, said: "Although so-called left-tail events are rare, this does not mean they can be ignored. An analogy is fire insurance for householders. A house fire is a rare event, but its consequences are so severe that few householders can ignore the risk - instead, they insure against it."

Towers Watson says much of the portfolio theory applied to pension schemes during the last decade has focused on improving financial efficiency in 'business as usual' scenarios.

Hess said: "Funds should contemplate the scenarios in which their sponsor is likely to be affected by a left-tail event, as well as envisage the likely state of markets in these circumstances.

"By doing so, they will be able to determine the behavior of different asset classes in these events and to mitigate unwanted correlations between the sponsor balance sheet and the fund's investment portfolio."

In other news, KPMG has analysed more than 100,000 occupational pension scheme member records and found several common errors that could increase fund liabilities by as much as 5%. 

KPMG, which used its KLean data quality tool, said one of the most common mistakes was that a third of records were missing entries for members' National Insurance records.

Other mistakes included missing guaranteed minimum pension figures, a retirement date that is inconsistent with the member's expected retirement age, missing contributions and missing salary data.

Finally, pensions and investment consultancy LCP has extended its international network with the opening of an office in Abu Dhabi.

Peter Bastiaens, managing partner of the Abu Dhabi office, said: "The decision to branch out into the UAE comes at a particularly opportune time for LCP. In light of new local regulations, there is an even greater need for sound advice as companies adapt to the changes."

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