Despite the rise in global equity markets over the third quarter of 2010, FTSE 350 company pension deficits have remained unchanged from the previous quarter and still stood at £85 billion on 30 September 2010, due to falling bond yields, according to new data from consultancy firm Mercer.

Asset and liability values have swung dramatically over Q3, says Mercer, with the aggregate deficit for the top 350 firms in the country moving by £45 billion. It hit a high point of over £100 billion in late August, and a low of £57 billion in July, ending up at its present unchanged figure, despite the FTSE All Share Index rising by almost 14 per cent over the third quarter of this year.

“Pension schemes are running to stand still in the face of such volatility” commented Dr Deborah Cooper, Head of Mercer’s Retirement Research Group. “Overall, the fall in bond yields wiped the value of the equity market recovery off company balance sheets. Despite companies continuing to make significant contributions to their pension arrangements and improvements in trustees’ invested funds, the balance sheet effects at the end of the quarter were the same as at the start.”

According to Mercer, the events of the last quarter highlight trustees and employers cannot view investment performance in isolation. Schemes, said the firm, need to consider the impact that market changes have on the scheme’s liabilities and the overall funding level, which can be even more volatile.

The research is produced by Mercer as part of its quarterly Pension Risk Update which analyses the aggregate pension commitments of FTSE 350 companies.

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