Pensions gap halved to £50bn

BRITAIN'S biggest companies have seen the shortfall in their pension schemes halve during the past year due to rising share prices, research showed today.

Consultants Hewitt Bacon & Woodrow estimate that the pensions deficit faced by FTSE 100 companies has fallen from £100bn at the worst point of 2003 to less than £50bn now.

The group added that the FTSE 100 Index may have to climb just above the 5000 threshold for the average company's deficit to be wiped out.

But the consultants warned that, despite company schemes being boosted by rising share prices, they still faced challenges.

Raj Mody, principal consultant at Hewitt Bacon & Woodrow, said: 'Although 2003 was a good year for the financial health of most pension schemes, it's important to note that they are not out of the woods yet. While assets are invested mainly in equities, schemes could still see a dramatic reversal of fortunes.'

The deficits were measured under the new accounting standard FRS17, which takes a snapshot of a company on a particular day and does not allow firms to smooth out the effects of stock market volatility.

But pension schemes have also been hit by a number of other challenges in recent years, such as poor stock market returns and increased life expectancy.

The National Association of Pension Funds recently reported that one in four final-salary schemes had closed to new members during the year to the end of April.