The total deficit of FTSE 100 DB pension schemes has improved by £8bn compared to a year ago, leaving total deficits at £50bn at the end of 2012, new research from JLT Pension Capital Strategies (JLT PCS) revealed.

The reduction in deficits has occurred as a result of an equity market rally and also funding injections from FTSE 100 companies of £12.7bn up from £11.3bn the previous year. BT carried out a deficit funding injection of £1.9bn, and 63 other FTSE 100 companies also reported significant deficit contributions.

Liabilities have continued to rise over the last year however, with total disclosed pension liabilities of the FTSE 100 companies rising from £444bn to £475bn.

JLT PCS managing director Charles Cowling said that despite deficit levels improving it is “imperative” that companies seek new ways to plug their funding gaps.

“As yields continue their downward trajectory on the back of continued investor demand, UK pension funds need to find a way to diversify away from traditional methods of risk-averse investment through corporate bonds and gilts. As a matter of urgency the government must develop mechanisms that provide low-risk opportunities with an attractive yield – bond-like structures, such as asset-backed securities or special “infrastructure bonds” which would benefit pension schemes,” he said.

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