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Increased contributions, strong markets help reduce FTSE 100 company pension deficits

Significant sponsoring employer contributions to FTSE 100 company pension funds helped drive a 32% reduction in the total deficit of those firms for the year ended June 30, shows analysis by JLT Employee Benefits.

The firm said favorable market conditions also contributed to the improvement, with deficits falling to 43 billion ($55.8 billion) over the year.

More than half of FTSE 100 companies reported significant cash injections into their pension funds, with total contributions increasing 65% to 10.8 billion. JLT said this was "largely attributable to activity by a small number of schemes."

However, deficit contributions were "dwarfed" by dividends across the FTSE 100, as 42 companies would have been able to settle their pension deficits in full with a payment of up to one year's dividend, said JLT. "The tension inherent between fund scheme deficits, delivering shareholder value and holistic covenant strength has been brought into sharp focus over recent months by the high-profile collapse of Carillion and BHS," said JLT in a statement accompanying the data.

These pension funds also saw an increase in their assets invested in fixed income, with bond allocations rising to an average 63% as of June 30, vs. 61% the previous year.

However, total disclosed pension fund liabilities grew 21% to 710 billion over the year, with low interest rates, increasing life expectancy and "aggressive regulation" contributing to this figure.