August 2, 2010 / 6:22 AM / 8 years ago

Pension deficit at top UK firms falls 26 pct - Aon

LONDON (Reuters) - The aggregate deficit of the UK’s 200 biggest corporate pension funds fell by a quarter in July to its lowest point this year on improving equity markets and falling liabilities, according to a study by consultant Aon.

Corporate defined-benefit pension schemes had a total deficit of 74 billion pounds at the end of July, compared with 100 billion pounds a month earlier.

The aggregate pension deficit of the top 200 companies averages out at 91 billion pounds over the year to date.

The improvement in the funding position was due to positive equity markets -- the FTSE 100 .FTSE rose 2.5 percent over the month -- and to an increase in corporate bond yields, which are used to calculate future liabilities.

UK corporate pensions generally increase annually to reflect inflation levels.

The current benchmark is the retail price index (RPI), but the government has announced that defined-benefit schemes will be indexed against the consumer price index, which tends to be lower than the RPI, resulting in lower pension increases for workers.

Aon forecast that the decision to change the inflation measure could cut the corporate pension bill by up to 150 billion pounds. (Reporting by Cecilia Valente, Editing by Michael Shields)

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