US Pension Deficits to Rise for 2005

November 10, 2005 ( - Pension deficits for major US firms are expected to rise to $129 billion by December, according to a report from Aon Consulting.

Reuters reports that this number is up 65% from last year.   Aon says the deficits will rise unless companies put up additional funds or the markets rise.   Aon compiled its data from Fortune 100 firms.

Meanwhile, Aon says the shortfalls of UK schemes are expected to remain steady at around 70 billion pounds (about $122 billion), according to Reuters.

Andrew Claringbold, actuary and principal at Aon in Britain, said, “While pension scheme funding levels have remained fairly stable in the UK this year, the experience in the United States shows that small movements in markets, especially bond markets, can cause significant movements in funding levels.”

Bond yields affect deficit numbers since they are used in many countries in calculating pension liabilities.   A drop in bond yields increases the expected cost for future benefits, thus increasing the shortfall.