Up to half FTSE 100 pension funds in surplus

By Laurence Fletcher

LONDON (Reuters) - Up to half of the pension schemes of FTSE 100 companies are currently in surplus, pensions consultants say, although inaccurate longevity assumptions could mean the situation is not as rosy as such figures suggest.

"It's moving from people talking about deficits all the time to talking about surpluses. The new concern is around what to do with the surpluses," Alex Waite, partner at pensions consultant Lane, Clark & Peacock, said in a recent interview.

Waite estimates that 35 of the FTSE 100's .FTSE 90-plus defined benefit schemes are in surplus as of May 1, up from only a handful last year. His projections take into account factors such as equity and bond returns and inflation, and he said the figure could rise to half of schemes in the near future.

"If we had a second four months of the year the same as the first four months, I suspect we'd be almost there," he said.

Pension deficits, treated like debt on balance sheets, have been a headache for firms in recent years, thanks to a bear market at the start of this decade and rising life expectancy, and many firms have had to divert money into their schemes.

However, Waite said the recent improvement had been caused by gains in the stock market, which has enjoyed a four-year bull market, higher real bond yields, which are used to measure pension liabilities, and better management of schemes.

Meanwhile, Deloitte & Touche told Reuters that 45 of the FTSE 100's schemes are in surplus, based on its projections.

Last week telecoms company BT Group (BT.L) said its pension fund, long deep in the red, had a surplus of around 1 billion pounds at the end of April.